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Stock Market:

A stock Market is place where stocks (shares) can be bought and sold. Stock
Exchanges are traded the shares of quoted companies. In Bangladesh, we have
two Stock Exchanges in Dhaka and Chittagong. The following type of
instruments is traded at Dhaka Stock Exchange (DSE) and Chittagong Stock
Exchange (CSE):

(a) Equity Shares (b) Debentures (c) Mutual Funds

The Dhaka Stock Exchange (DSE) has 195 SEC registered trading
members/brokers and the Chittagong Stock Exchange (CSE) has 124 registered
brokers. Many of these registered brokers have authorized representatives
operating on the floor on behalf of the concerned brokers of DSE or CSE. One
should execute their deal through a registered broker of a recognized stock
exchange or through a registered authorized representative.

All investors should open a BO accounts with necessary documentary support of


proof of identity and get the registration/account number. The feature of this
opening an account is to reduce the chances of any disputes.

Our Journey:

We went to DSE on 9th April. That was nice sunny day went their by Roadstat.
When we went there we were stuck till 1 hour for the procession of Jakir Party
(JPB). Then we got down from the bus and took part on that procession. Actually
that was a very nice journey. At last after two our journey we reached in our
destination.

Though we are in trouble we are very glad that we got the opportunity to visit the
DSE. We thanked for this opportunity to our respected instructor Tashfeen
Hussain for his encouragement to go DSE.

At first we met with the Chief Executive Officer SK .G. Kuddus of M. Securities
Ltd. and we also met with Md. Delower Hossain the Programming Officer of DSE.
Both of them were very cooperative and provide us various important information
about DSE.

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We also met with the assistant receptionist Nurul Islam, library research officer
Hosna Ara Parvin and library publication officer Shafiqur Rahaman. All of them
gave many information about DSE library, how it works and how it goes.

INTRODUCTION OF DSE

Incorporated as East Pakistan Stock Exchange Association Ltd. : 28th April


1954

Start of Formal Trading : 1956

Renamed as East Pakistan Stock Exchange Ltd. : 23rd June 1962

Renamed as Dacca Stock Exchange Ltd. : 13th May 1964

Trading Suspended under new State Policy : 16th December 1971

Trading Resumed in Bangladesh : 16 August 1976

Starting Of All Share price Index calculation : 16th September 1986

Share price Indices calculation on basis of IFC Designed formula : 1st


November 1993

Starting of Automated trading : 10th August 1998

Starting Of DSE-20 Index calculation : January 2001

Starting Of DSE General Index calculation : 27th November 2001

Start of CDS through CDBL : 24th January 2004

DSE at a Glance

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FUNCTIONS OF DSE

 Listing of Companies.(As per Listing Regulations).


 Providing the screen based automated trading of listed Securities.
 Settlement of trading.(As per Settlement of Transaction Regulations)
 Gifting of share / granting approval to the transaction/transfer of share
outside the trading
 system of the exchange (As per Listing Regulations 42)
 Market Administration & Control.
 Market Surveillance.
 Publication of Monthly Review.
 Monitoring the activities of listed companies. (As per Listing Regulations).
 Investors’ grievance Cell (Disposal of complaint bye laws 1997).
 Investors Protection Fund (As per investor protection fund Regulations
1999)
 Announcement of Price sensitive or other information about listed
companies through online.

TRADING DAY

The trading shall be open on all days except bank holidays as declared under the
Negotiable Instruments Act, 1881 (XXVI of 1881):

Provided that where the Council, in consideration of any exigencies, considers it


expedient may declare that there shall not be any trading on any other day as
may be specified in the resolution under immediate intimation to SEC: Provided
further that the Council may, from time to time, re-fix the trading days in the
interest of the Stock Exchange under immediate intimation to SEC.

TRADING PERIOD

Unless otherwise decided by the Council, the trading period shall be between10-
30 AM to 2-30 PM on all trading days: Provided that the Council may, in
consideration of any particular circumstance or situation, extend, curtail or
change the trading period, including session timings of any particular trading day
under immediate intimation to SEC: Provided further that the power under the
first proviso may also be exercised by the Management Team of DSE comprised
of the CEO, the Secretary and the heads of relevant departments of DSE, if, in
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their opinion, convening of Council meeting is not convenient or expedient in
consideration of the circumstances or situation concerned.

QUALIFICATION FOR TRADING

(1) A member shall qualify himself for trading if he –


(a) obtains a registration certificate from the Commission issued
under regulation 5(4) of the Securities and Exchange
Commission (Stock-Dealer, Stock-Broker and Authorized
Representative) Regulations, 1994;
(b) becomes a member of the DSE Clearing House;
(c) is not otherwise barred by DSE or SEC under any law, rule or
regulations for the time being in force for trading.

(2) The DSE shall notify the name and other necessary particulars of a
member whenever he incurs a disqualification for trading or becomes
otherwise ineligible for trading.

TYPES OF MARKETS

There shall be the following four markets in the system, namely:

(a) Public Market - Matching in this market is automatic based on the touchline
prices, which follows normal settlement procedure.

(b) Spot Market - Matching in this market is also automatic, settlement of which
follows procedure for spot transactions. The Management Team may put an
instrument on compulsory spot to curb volatility in prices of the instrument.

(c) Block Market - This is the market for bulk selling and buying on automatic
matching with equal quantity and best price (all or none condition) basis. Orders
entered in this market are immediately flashed on all trading workstations. The
minimum amount for a bid of bulk lot for a certain security shall be Tk. 0.5 (point
five) million at market price unless otherwise fixed by the Council from time to
time with the approval of the SEC.

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(d) Odd lot Market - Odd lot shares are traded in this market on automatic
matching with equal quantity and best price (all or none condition) basis.

Trading sessions - There shall be five sessions of trading period, namely


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2(a) Pre-opening session;
3(b) Opening session;
4(c) Continuous or Regular trading session;
5(d) Closing session; and
6(e) Post-closing session.
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Types of transactions- Orders may be grouped or categorized based on the
following, namely:-
1(a) Price;
2(b) Volume; and
3(c) Validity.
SHARE CATEGORIZATION: A, B, G AND Z

A-Category Companies

Companies, which are regular in holding the current annual general meetings
and have declared dividend at the rate of ten percent or more in the English
calendar year.
B-Category companies

Companies, which are regular in holding the current annual general meetings but
have failed to declare dividend at least at the rate of 10% of more in the English
calendar year.

Z-Category companies

companies which have failed to hold the current annual general meeting or has
failed to declare any dividend or which are not in operation continuously for more
than six months or who accumulated loss after adjustment of revenue reserve, if
any is negative and exceeded its paid up capital.

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G-Category companies

Greenfield’s companies: the lone company, which is placed in this, group I s


Lafarge Surma Cement.

The Clearing and Settlement module

The Clearing and Settlement module provides the management of trade from the
point of entry into the Settlement Pool trade database until it has been delivered
and settled and removed from the Settlement Pool. It consists of three major
business processes.

Clearing:

participant trade reporting and affirmation, billing, assigning settlement


instructions.

Settlement:

The process of overseeing that delivery of all instruments to the buyer and
payment of all moneys to the seller has occurred before removing the trade from
the settlement pool. In our Clearing and Settlement System, new netting system
was being followed from 2nd July 2000.

A Group: Number of Instruments are 131 (112 + 08D + 11M) , Here D for
Debentures & M for Mutual funds (Trading in Public Market with trade for trade
settlement facility for scrip only through DSE Clearing House on T+2, T+4 basis)

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The above cycle is valid for A ,B & G category
instruments

B Group: Number of Instruments are 39 (Trading in Public Market with trade for
trade settlement facility through DSE Clearing House on T+2, T+4 basis)
G Group: Number of Instrument is 1 (Trading in Public Market with trade for
trade settlement facility through DSE Clearing House on T+2, T+4 basis)
Z Group: Number of Instruments are 96 (Trading in Public Market with trade for
trade settlement facility through DSE Clearing House on T+4, T+7 basis). "Z
Group" is marked in BASES columns in our TESA Trading Software.

This cycle is valid only for Z group instruments

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WHAT IS DEMATING SHARE?

All selling shares have to transfer (Pay in) to the clearing account of selling
Brokers from concerned BO account within settlement period. Regarding the
cash payment the procedure will remain unchanged as mentioned above

THE LISTING REGULATIONS OF THE DHAKA STOCK EXCHANGE LIMITED

Notification No. SEC/Member-II, Dated 8th April 1996 In exercise of the powers
conferred by section 34 (1) of the Securities and Exchange Ordinance, 1969 (XVII
of 1969), the Dhaka Stock Exchange, with the previous approval of the Securities
and Exchange Commission, pleased to make the following regulation, namely: -

LISTING OF COMPANIES & SECURITIES

Rule (A)
(1) No dealings in securities of a company shall be allowed on the Exchange
either on the Ready quotation Board or Cleared List, unless the company or the
securities have been listed and permission for such dealing has been granted in
accordance with these Regulations.

(2) The permission under sub-regulation may be granted upon an application


being made by the company or in respect of the securities in the manner
prescribed at least ten days prior to issue of the first prospectus. The Exchange,
in granting such permission will consider, among other things sufficiently of public
interest in the company or the securities as determined by the Council in a well-
defined way.

(3) The Exchange shall decide the question of granting permission within a
maximum period of six weeks from the date of closure of subscription lists. In
case the permission is refused, the reasons thereof will be communicated to the
applicant and the Commission within six weeks from the date of closure of
subscription lists.
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(4) The Council will be the sole authority to grant, defer or refuse such
permission and may for that purpose, relax any of these regulation subject only
to two-third majority of the councilors present at such meeting of the council and
so resolving by the majority of them.

Rule (B)

(1) The application for listing shall be made by the applicant-company or on


behalf of the security in the prescribed form and will be accompanied by the
fees, specified in the Regulations.

(2) The Council may require additional evidence, declarations, affirmations and
information as also other forms to be filled up reasonable and relevant to
application for listing, and all such requisitions shall be deemed to be prescribed
requisitions for the purpose of a proper application for consideration by the
Council for listing.
(3) If an application together with the additional information referred to in sub-
regulation (2) is not submitted, the Council may defer consideration or decline to
consider it in which case such application will stand disposed of as refused.

However, the applicant may move a fresh application after six months from the
date of such refusal unless the Council otherwise decides.

(4) An Applicant-company or security applying for listing shall furnish full and
authentic information in respect thereof and such other particulars reasonable
and relevant to the application for listing, as the Council or the Exchange may
require from time to time. All routine particulars may be called for by the
Secretary.

APPLICATION FOR LISTING


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0 The following documents and particulars duly certified by the company or the
Company or authorized representative presenting the security shall be submitted
to the Exchange at the time of application for listing or any time on demand by
the Exchange.

1. Application for listing as per Form I;


2. Memorandum & Articles of Association;
3. Copy of the Certificate of incorporation;
4. Copy of the Certificate of Commencement of Business;
5. Copy of the Feasibility Report, in case of a new project;
6. Copy of the certificate of registration of the industrial Units issued by the
Council of Investment or any other competent authority;
7. Copies of all material contracts and agreements entered into or
exchanged with foreign participants, machinery suppliers and any
other financial institutions;
8. Copies of Letter (s) of Credit established in favour of Machinery Suppliers,
if linked with the public issue;
9. Copy of Consent order issued by the Commission;

10. Names of Directors along with directorship of other companies listed on


the Exchange;
11. Draft prospectus/Offer for sale;

12. Auditors Certificate for the amount subscribed by the promoters/directors/


subsidiaries/associates;
13. Copies of the agreements relation to issue to securities for consideration
other than cash, if any;
14. Copy of underwriting agreement (if any);
15. Statement of audited accounts for the last 5 years or for a shorter number
of years if the company is in operation only for such shorter period;
16. Statement showing the cost of project and means of finance;
17. Copies of the approval of tax-holiday application under Ordinance, 1984;

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18. Copies of the consent Letters from Bankers or Financial Institution to the
Issues;
19. Application for submission of Under of Undertaking and payment of fees
as per Form II;
20. Copy of approval of prospectus/offer for sale from Commission; and
21. Any other documents/material contract and such other particulars as may
be required by the Exchange or by the Council and/or by the Commission;

CDBL (Central Depository Bangladesh Limited)


Central Depository Bangladesh Limited (CDBL) was incorporated as a
public limited company on 20th August 2000 to operate and maintain the Central
Depository System (CDS) of Electronic Book Entry, recording and maintaining
securities, accounts and registering transfer of securities; changing the
ownership without any physical movement or endorsement of certificates and
execution of transfer instruments, as well as various other investor services
including providing a platform for the secondary market trading of Treasury Bills
and Government Bonds issued by the Bangladesh Bank. CDBL went live with the
Electronic Treasury Bills Registry of Bangladesh Bank on 20th October, 2003.
CDBL started Equity Market operations on 24th January, 2004 with one pilot
stock.

CDS system:

Buying/selling through Stock Brokerage house and another way is stock


trading, which is done by individuals. The brokerage system is controlled by CDS
system. From this they look at the current stock price of any company’s share
and the buy/sell price given by the people who trade shares through brokerage
houses.

The buy/sell order form is where people will give their name and the member
number they have given by brokerage house. Then they place the name of the
company, the number of shares and how much price they r asking for selling or
what price they r willing to buy shares. If anybody‘s demand for share price meet
the sell price then the main trading occurs.

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After the trading, individuals receive money 2/3 days later. This is written in
CDBL system as T + 1, 2, 3….

Under the CDS system there are about 50-55 enlisted companies. Most of them
are a class companies and they are from different groups. There are almost 285
enlisted companies in DSE and out of the number, below 30% are under DSE
system and used by breakage house.

(TESA)Tandem Electronic Securities


Architecture
TESA SYSTEM

The application, which runs in DSE for trading, is called TESA (Tandem
Electronic Securities Architecture). TESA has two parts: MSA (Member’s Server
Application) & TWS (Trader workstation). MSA is the “Gateway” between the
traders and the Stock Exchange, which manages all the transactions and
database operations between the traders and the Trading Engine. TWS is the
Front-end Application closer to investors, where they can submit Buy/Sell orders
for their desired securities

PRINCIPAL FUNCTIONS OF TESA

Market Information: Supplying all market information needed to formulate the


buy and sell decisions

Order Management: Accept, validate and store orders and quotes from broker
workstations and / or systems.

Order Execution: Automatically executes orders when buy and sell prices
match.

Trade Reporting: Trade execution reports are provided to each trade


participant, to the settlement system and / or the depository and to the market.

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Index calculation: Calculates and publishes market indices (DSE General Index
& Weighted Average Index.)

Market Access: Provide exchange members with efficient affordable GUI-based


tools for accessing the market

DIFFERENT MARKET SUPPORTED BY TESA

A Central Trading System supports four different markets for trading. Public
Market, Spot Market, Black Market and the Oddlot Market. You can submit
orders to any of these markets through the TWS application. There are four
options while submitting an order to the Central Trading System.

• If anyone wants to Buy or sell some shares and se4ttle the trade during
the normal settlement process, he or she should submit the order to the
Public Market.
• Some might want to buy or sell shares and he or she needs the settlement
within 24 hours then they should submit the order to the Spot Market.
• If someone wants to buy or sell shares in very large qualities, then you
should submit your orders to the Black Market.
• If you want to buy or sell shares in oddlots or small lots, them you should
submit your orders to the Oddlot Market.

TRADING SESSIONS

TESA conducts trading in-5-phases.

Enquiry: In this session Brokers can logon to the system. No order will be
submitted in this session. No trade will be executed. Only previous orders can be
withdrawn in this session

Opening: The Opening is a pure, single-price auction. All buy and all sell orders
are compared and calculate the open-adjust price. No trades will be executed in
this session

Continuous Trading: During this phase, participants enter orders and


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immediate execution or for inclusion in the book. Automatic matching and
execution takes place based on best price/ first in, first out trading rules

Closing: Closing prices are calculated and disseminated to market participants

Post Closing: In this session all trades will be executed only closing prices

Enquiry: Market will be closed in this session & other facilities like the previous
enquiry session

HOW BROKERS AND AGENTS MAKE THEIR PROFIT

A broker is a representative of an investor who is the intermediary of


buying and selling shares, debentures and stocks. They work under the
authorized agent of stock exchange. Their main source of income is the
commission what they get from their agent. And an agent generates money
through Laga and Hawla, which they collect from the Stock Exchange after a
day.

DSE LIBRARY

Library is another important section of DSE. Here they reserve all the
information about their quoted companies. Like, companies’ monthly review,
annual report, half yearly report, brochure etc. they stored all the companies
information according to the sector wise.

In the library they have access through internet and the officials can see
the transaction of stocks. They have a scan machine through which they can
upload much information about companies. There has one receptionist is sited
outside the library. If anyone wants to enter there he or she must be signed up in
a sheet to the receptionists. In the library they kept all daily newspapers in a very
respectable manner. Anyone can go through that the data what they stored about
all the companies, if anyone needs that data, they cannot take outside those
catalogs, or annual reports. He or she has to write anything sitting in the library
and have arranged seats. Officials of library-

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o Library research officer – Hosna Ara Parvin.
o Library publication officer – Shafiqur Rahaman.
o Asst. Receptionist – Nurul Islam.

CONCLUSION

To keep pace with the globalization of securities trading, Dhaka Stock Exchange
has taken dynamic and bold initiatives in evolving an over-all policy to modernize
and automate the trading facilities offered to its members and investors. Most
noticeable area of development is the exchange's trading, equity, and clearing
system.

Finally, it was a great experience for our entire group member. We come to know
various aspects about DSE. How it works, how brokers deals with the market,
how share price rises and falls etc. At last we want to thanks to Md. Delower
Hossain and SK. G. Kuddus for helping us to provide the information about
Dhaka Stock Exchange.

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Bibliography

1. The listing regulation, modified up to 22nd July 1999

2. http://www.cdbl.org

3. http://www.dsebd.org

4. Monthly Review of Dhaka Stock Exchange.

5. Kuddus, SK. G. Chief Executive. M. Securities Ltd. Dhaka Stock


Exchange Ltd.

6. Hossain, Md. Delower. Programming Officer. Dhaka Stock


Exchange Ltd.