Stock Markets in Bangladesh

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<ul><li><p>7/30/2019 Stock Markets in Bangladesh</p><p> 1/43</p><p>I N T E R N S H I P R E P O R T</p><p>Md.Yousuf Chowdhury</p><p>The primary market is where capital is actually raised by thecompany selling stock to investors. Company in a separate arena fromthe stock market performs the capital raising function. The stockexchange is a trading vehicle place where buyers and sellers arebrought together. All profits and losses go directly to the investors, lesscommissions and fees. The stock market is structured t provideliquidity and marketability to the securities industry. It is a worldwidesystem designed to bring buyers and sellers together. Companyowners and stockholders, whether part of management, venturecapitalists or investors, need a way of turning their stock certificatesback into cash. The stock market provides this opportunity. It is thiskind of liquidity that makes investing in stocks attractive. Stock pricesare set by supply and demand. It is an auction market, whereinvestors, through their intermediaries-brokers bid for stock at a price</p><p>they feel is fair at the time. The market provides a ready market forstocks. With a simple phone call, an investor can buy or sell stock,virtually in minutes.</p><p>A nationwide user-friendlycentral depository system (CDS)has also been brought into. AtCSEs taking the first stem,securities and exchangecommissions of Bangladesh hasformed a committee to developan appropriate legal framework</p><p>for the central depositorysystem. Considering theimportant role of CSE on thedevelopment of capital market ofBangladesh, an attempt has beenfabricated in this paper to studythe simultaneous practices ofstock trading in Chittagong byCSE. Although various researchworker had been fabricatedabout various topics of CSE, avery few have been taken toanalyze the overall operationalaccomplishment and theprofitability of Chittagong stock</p><p>exchange (CSE).</p><p>The stock exchange is asecondary market, tradingmarket. And</p><p>Chittagong</p><p>Stock</p><p>Exchange.</p><p>A S H O R T NOT E ON S TOCK MARKE T</p><p>1</p><p>The stock market is an essential part of capital market. The economyof a country largely relies on a strong capital market supported by avibrant stock market. Contribution of any stock exchange generallyleads to the economic growth by stimulating the funds to financeindustry and other enterprises and changing the savings to industriesand other productive activities. The existence of a stock markefacilitates listed companies to raise additional capital quickly andcheaply as they enjoy reputation. Bangladesh emerged as anindependent country in the year 1971. But till now, the industriadevelopment of Bangladesh is still insolvent and for swifindustrialization, formation of capital is the most significantcomponent. But it is easy to procure through capital market withproper support of stock market. Bangladesh stock market has seen arapid growth in the recent years. Initial public offerings (IPO) areincreasing and foreigners are also increasingly showing interesresponding to the governmental policies and development in the stockexchanges. At present, their are two stock exchanges, in both theexchanges, trading is done through automation system- a newtechnologically developed system for stock trading. By introducing thissystem, both the exchanges increased their role in the overaldevelopment of capital market or the country. The Chittagong stock</p><p>exchange (CSE) has been established in 1995 as model of internationastandard. A complete automation project of CSE is on full sway.</p></li><li><p>7/30/2019 Stock Markets in Bangladesh</p><p> 2/43</p><p>I N T E R N S H I P R E P O R T</p><p>Md.Yousuf Chowdhury</p><p>The Chittagong Stock Exchange (CSE)began its journey in 10th October of</p><p>1995 from Chittagong City through thecry-out trading system with thepromise to create a state-of-the artbourse in the country.</p><p>Founder members of the proposed ChittagongStock Exchange approached the BangladeshGovernment in January 1995 and obtained thepermission of the Securities and Exchange</p><p>Commission on February 12, 1995 forestablishing the country's second stockexchange.</p><p>The Exchange comprised of twelve Boardmembers, presided by Mr. Amir Khosru MahmudChowdhury (MP) and run by an independentsecretariat from the very first day of itsinception. CSE was formally opened by thenHon'ble Prime Minister of Bangladesh onNovember 4, 1995.</p><p>The mission of the CSE is to create oneffective, efficient and transparentmarket of international standard to saveand invest in Bangladesh in order tofacilitate the competent entrepreneur to</p><p>raise capital and accelerate industrialgrowth for overall benefit of theeconomy.</p><p>The Chittagong Stock Exchange believesthat a dynamic, automated, transparentstock exchange is needed in Bangladesh.It works towards an effective, efficientand transparent market of internationalstandard to serve and invest inBangladesh in order to facilitate thecompetent entrepreneurs to raise capitaland accelerate industrial growth foroverall benefit of the economy and keep</p><p>pace with the global advancements.</p><p>Missions</p><p>Chittagong</p><p>Stock</p><p>Exchange.</p><p>ABOUT CSE</p><p> Background</p><p>Vision:</p><p>The visions of CSE are as follows:</p><p>a) To develop a strong platform for raising capitalb) To provide an investment opportunities for the investor</p><p>c) To develop a corporate culture through mandatory corporate membership</p><p>d) To develop a transparent market ensuring investors interest</p><p>2</p></li><li><p>7/30/2019 Stock Markets in Bangladesh</p><p> 3/43</p><p>I N T E R N S H I P R E P O R T</p><p>Md.Yousuf Chowdhury</p><p>Chittagong</p><p>Stock</p><p>Exchange.</p><p>e) To expand the capital market</p><p>f) To collect, preserve and disseminate data and information on stock market</p><p>g) To provide a fully automated trading, clearing and settlement system to ensure quick,</p><p>easy, accurate and easily accessible to all transactions</p><p>h) To make interest about Bangladesh stock market for the non-resident Bangladeshis toinvest in this market</p><p>i) To develop a research sell for analyzing status of the market and economy</p><p>j) To attract the investors for getting membership of SEC</p><p>k) To ensure smooth customer service and truncation</p><p>l) To achieve goodwill</p><p>m) Total necessary steps for increasing customers.</p><p>3</p><p> Objectives</p><p> Develop a strong platform for entrepreneurs raising</p><p>capital;</p><p>Provide a fully automated trading system with mostmodern amenities to ensure: quick, easy, accurate</p><p>transactions and easily accessible to all;</p><p> Undertake any business relating to the Stock Exchange,</p><p>such as a clearing house, securities depository center or</p><p>similar activities;</p><p> Develop a professional service culture through</p><p>mandatory corporate membership;</p><p> Provide an investment opportunity for small and large</p><p>investors;</p><p> Attract non-resident Ban ladeshis to invest in</p></li><li><p>7/30/2019 Stock Markets in Bangladesh</p><p> 4/43</p><p>I N T E R N S H I P R E P O R T</p><p>Md.Yousuf Chowdhury</p><p>BOARDS OF DIRECTORS</p><p> Legal base of CSE</p><p>As legal entity CSE is a not-for-profit public</p><p>limited company. All of its 129 members are</p><p>corporate bodies. It has a separate secretariat</p><p>independent of policymaking Board. TheBoard comprises of brokers and non-brokers</p><p>directors with equal proportion to ensure thetransparency.</p><p>The Board constituted Committees to delegate</p><p>such functions and authority as it may deem</p><p>fit. There is an independent secretariat headed</p><p>by a full time Chief Executive Officer. CSE</p><p>activities are regulated by its own regulations</p><p>and bye laws along with the rules, orders and</p><p>notification of the SEC.</p><p>Chittagong</p><p>Stock</p><p>Exchange.</p><p>4</p><p>Sl. No.Name of the Directors Designation Elected/non</p><p>-elected</p><p>1 Mr. MKM Mohiuddin President Elected</p><p>2 Mr. Nasiruddin Ahmed Chowdhury Vice -President Elected</p><p>3 Mr. Fakhor Uddin Ali Ahmed Vice -President Elected4 Mr. A.Q.I. Chowdhury, OBE Vice -President Elected</p><p>5 Mr. Abu Sayed Md. Shahidullah Director Elected</p><p>6 Mr. Al Maruf Khan Director Elected</p><p>7 Mr. A.S.M. Nayeem Director Elected8 Mr. Bijon Chakroborty Director Elected</p><p>9 Mr. M. Salman Ispahani Director Elected</p><p>10 Mr. Murshed Murad Ibrahim Director Elected</p><p>11 Mr. Syed Mahmudul Huq Director Elected</p><p>12 Mr. Tareq Kamal Director Elected</p><p>13 Dr. A. Majeed Khan Director Non-Elected</p><p>14 Prof. Abu Ahmed Director Non-Elected</p><p>15 Engr. Ali Ahmed Director Non-Elected</p><p>16 Mr. Amir Humayun Mahmud Chowdhury Director Non-Elected17 Mr. Anis A. Khan Director Non-Elected18 Mr. Farooq Sobhan Director Non-Elected</p><p>19 Mr. Mamun Rashid Director Non-Elected</p><p>20 Mr. Md. Sarwar- E- Alam Director Non-Elected</p><p>21 Prof. Rabiul Husain Director Non-Elected</p><p>22 Mr. Mohd. Safwan Choudhury Director Non-Elected</p><p>23 Mr. Waliur Rahman Bhuiyan Director Non-Elected</p><p>24 Mrs. Yasmeen Murshed Director Non-Elected</p><p>25 Mr. A.B.Siddique Director Ex-officio</p></li><li><p>7/30/2019 Stock Markets in Bangladesh</p><p> 5/43</p><p>I N T E R N S H I P R E P O R T</p><p>Md.Yousuf Chowdhury</p><p>The CSE Board of Directors is</p><p>comprised of a maximum of 25members, of whom the GeneralBody of the Exchange elects 12and Securities and Exchange</p><p>Commission nominates 12. TheBoard elects its own President</p><p>and 3 Vice- Presidents. TheChief Executive Officer of CSE</p><p>is an ex-officio member of theBoardThe core responsibility of theBoard is to frame the CSE</p><p>policies and supervise theExchange's operations:</p><p>MANAGEMENT TEAM</p><p>Chief Executive Officer: The CEO is responsible for implementing the decisions of the Board, the day to day running</p><p>of the exchange and formulating strategic plans for agreement with the board.</p><p>Functional department</p><p>Corporate department Market operations Compliance department System department Finance department</p><p>R &amp; Ddepartme</p><p>nt</p><p>Clearing andsettlement</p><p>Membership</p><p>Listing</p><p>Inspection</p><p>Surveillanc</p><p>e</p><p>Chittagong</p><p>Stock</p><p>Exchange.</p><p>5</p></li><li><p>7/30/2019 Stock Markets in Bangladesh</p><p> 6/43</p><p>I N T E R N S H I P R E P O R T</p><p>Md.Yousuf Chowdhury</p><p>Chittagong</p><p>Stock</p><p>Exchange.</p><p>CORPORAT E D E P AR TME NT</p><p>6</p></li><li><p>7/30/2019 Stock Markets in Bangladesh</p><p> 7/43</p><p>I N T E R N S H I P R E P O R T</p><p>Md.Yousuf Chowdhury</p><p>This department carries out the following functions:</p><p> Maintain library contents</p><p> Press cuttings and press relations</p><p> Produce portfolio and other CSE publications Public relations</p><p> Investor's information cell</p><p>To fulfill the need, CSE has been publishing a monthlybulletin named market update since from its verybeginning. From November 1997 this monthly bulletinwas replaced by its upgraded version under a new titlePortfolio. Portfolio is publishing regularly withincreasingly better content, sharp analysis and greaterquality. In the year 2000 CSE decided to publishPoprtfokio quarterly instead of monthly. Anothermonthly publication is newsletter in Bengali.</p><p>These library contains international newspapers,journals, stock market related books, publications,listed companies information, CD-rom, video cassettes,annual report of different stock exchange and of</p><p>course, different course related books of differentcategories. The library has been steadily expandingwith accession of more books and periodicals, althoughits user has not been increasing.</p><p>The CSE market transaction data are regularly updatedin every 2 hours on this web site, which includes thecurrent issues of the Portfolio. CSE also update its website time to time, especially when any change tookplace.</p><p>Research, Corporate Development &amp;Information:</p><p>Chittagong</p><p>Stock</p><p>Exchange.</p><p>Portfolio:</p><p>Library:</p><p>Web site:</p><p>C LEAR ING &amp; S ETTLEMENT</p><p>7</p><p>Research and publications are essentialpre-requisites for effective functioningand development of any stock</p><p>exchange.</p><p>CSE has developed and maintaining aspecialized and well furnished libraryfor the use of the members, brokers,dealers, executives as well as studentsto fertilize the education know-how.</p><p>CSE has an excellent and attractiveweb-site containing CSE history, rulesand regulation, information regardingtrade, listed companies, financialinformation and so on, for the netbrowsers.</p></li><li><p>7/30/2019 Stock Markets in Bangladesh</p><p> 8/43</p></li><li><p>7/30/2019 Stock Markets in Bangladesh</p><p> 9/43</p><p>I N T E R N S H I P R E P O R T</p><p>Md.Yousuf Chowdhury</p><p>The selling members deliver the</p><p>securities to the Clearing House on the</p><p>pay-in day in case of physical</p><p>settlement and make available the</p><p>required securities in the clearingaccounts maintained with CDBL in case of</p><p>dematerialized securities. Members are</p><p>required to open clearing accounts with</p><p>depository participants of CDBL.</p><p>The Clearing House delivers the</p><p>securities certificates to the buying</p><p>members on the pay-out day and CDBL</p><p>credit the required securities to the</p><p>buying members clearing account in case</p><p>of dematerialized securities if there is</p><p>no receivable money pending.</p><p>Settlement of transaction offoreign buyer and/or seller</p><p>involving a custodial bank</p><p>is done directly between the</p><p>members through the</p><p>custodial bank with</p><p>intimation to the clearing</p><p>house.</p><p>Chittagong</p><p>Stock</p><p>Exchange.</p><p>SPECIAL SETTLEMENT REQUIREMENTS FOR</p><p>FOREIGN INVESTOR INVOLVING</p><p>CUSTODIAN BANK</p><p>FAILED TRADES:</p><p>If a member fails to deliver securities or make payment on the settlement day, the stock exchange</p><p>automatically auctioned the unsettled transaction on the risk and account of the defaulting member.</p><p>No prior notice is given. The defaulting member is not allowed to carry out trading from the day</p><p>after settlement day until payment of the outstanding money and a fine as decided by CSE.</p><p>The Clearing House receives cheques from the buying member on the pay in day and the selling member received</p><p>cheques from the Clearing House on the pay-out day if there are no receivable securities pending.</p><p>CATEGORY WISE SETTLEMENT SYSTEM AND SETTLEMENT CYCLE</p><p>9</p></li><li><p>7/30/2019 Stock Markets in Bangladesh</p><p> 10/43</p><p>I N T E R N S H I P R E P O R T</p><p>Md.Yousuf Chowdhury</p><p>Chittagong</p><p>Stock</p><p>Exchange.</p><p> Pay and pay out day for Spot order transactions of all categories of companies are T+0 and T+1 respectively.</p><p> Direct settlement of foreign buyer and/seller shall be within T+5 and intimation thereof to CSE within T+6</p><p>[Notes: T stands for Trading day;]</p><p>MARKET OPERAT ION</p><p>10</p><p>Categor</p><p>y</p><p>Criteria Settlement System Settlement Cycle</p><p>A Mutual Fund, Regular AGM, Declared and</p><p>paid at least 10% dividend within sixty days</p><p>from the date of declaration and Submission</p><p>of compliance re thereof to SEC within seven</p><p>working days from the date completion of</p><p>disbursement</p><p>Netting for payment obligation and</p><p>trade for trade for securities</p><p>obligation</p><p>Pay in day = T+1</p><p>Pay out day = T+3</p><p>B Regular AGM, Declared and paid Dividend</p><p>less than 10% and Submission of thecompliance Report to SEC within the time</p><p>limit</p><p>Trade for Trade for both securities</p><p>&amp; money obligation</p><p>Pay in day = T+ 1</p><p>Pay out day=T+3</p><p>G Greenfield companies Trade for Trade for both securities</p><p>&amp; money obligation</p><p>Pay in day = T+ 1</p><p>Pay out day=T+3</p><p>N All newly listed companies except Greenfield</p><p>companies</p><p>Trade for Trade for both securities</p><p>&amp; money obligation</p><p>Pay in day = T+ 1</p><p>Pay out day=T+3</p><p>Z Irregular AGM or Declared no dividend at all</p><p>or declared dividend but failed to pay it off or</p><p>Submission of the requisite compliance report</p><p>to SEC within the time limit or Not inoperation for six months, or Accumulated loss</p><p>after adjustment of reserve, if any, is negative</p><p>and exceeded its paid-up capital excluding</p><p>those who declared dividend....</p></li></ul>