Volatility InCapital Mark

et

Stock Market

1996 &

2010-2011

Post Mortem

Stock Market

Investors Market

Ownership

Stock Market Crash

Big Anomalies

1929 & 2008

1991 1996 & 2011

Bangladesh Stock Market

DSE CSE BSEC

1996

Paper Share

No Circuit Breaker

Bull Run

November 6, 1996

1996

Bubble Burst

Decreasing trend for 7 Years

Reason behind the 1996 Crash

Manipulation

Inside Information

Failure of Market Regulators

DVP Sysem

Reason behind the 1996 Crash

Information Inefficiency

Steps Taken after 1996 Crash

Legal Action

CMDP

Automated Trading System

2010-2011 Crash

Inception of the Bubble

Dramatic increase of Share Price

Timeline of 2010-2011 Crash2010

8th December 2010

19th December 2010

January 2011

Factors Contributed 2010-2011 Crash

Role of Market Regulators

Demutualization of Exchanges

Investment of Bank

Pre IPO and IPO Process

Factors Contributed 2010-2011 Crash

Uniform Face Value of Share

Placement Trade

Omnibus Account

Asset Revaluation and Rumor

Factors Contributed 2010-2011 Crash

Book Building Method

Serial and Artificial Trading

Comparison2011 1996Trading was automated Trading was not automatedSurveillance was strong Surveillance was weakCircuit breakers and international protections were in place

Circuit breakers and international protections were not properly in place

Being automated there were no forged shares traded and the kerb market

Being not automated there were forged shares traded and the kerb market

There were also omnibus accounts in the market

There were no omnibus accounts in the market

The BO account value was 35 lacs Compared to 3 lacs before2011 crash was an asset bubble The 1996 crash was a result of a

speculative bubble

In 2011 it lost up to 660 points 1996 the index lost 232 points

Recommendation

Development of Rules Margin Loan DecisionSponsor DirectorBook BuildingExposure

Recommendation

Role of RegulatorsHonestyProhibition of Insider TradingConversion of Omnibus

Recommendation

Role of GovernmentLegal ActionSecurity LawsBalancing Demand and SupplyProtecting from Manipulation

Thank YOU