Alternative trading platform launched for non-listed firms

The Dhaka Stock Exchange (DSE) launched the Alternative Trading Board (ATB), a platform for trading non-listed securities in the stock market, on Wednesday.

To mitigate the risks of share manipulation, profits cannot be taken by selling shares within three months of purchase. The gains must be deposited in the investor protection fund as the profit pull out will require a three-month wait since the purchase.

On the opening day, 500 shares of LankaBangla Securities were traded, with the company's shares increasing 3.36% from the opening price and trading at Tk15.40. As per the rules, the company will offload 10% of its shares within the next 30 days.

Besides, Pran Agro Limited's green bond of Tk200 crore has been listed on the first day of the alternative trading platform. However, no units of the bond were traded.

During the inauguration, Bangladesh Securities and Exchange Commission (BSEC) Chairman Professor Shibli Rubayat-Ul-Islam said, "I am optimistic that the new year will be good for the stock market. Efforts are underway to introduce more new products.

"But the benefits of new products will not bear fruit overnight. Results will come gradually."

BSEC Commissioner Shaikh Shamsuddin Ahmed, DSE Chairman Md Yunusur Rahman, Acting Managing Director Saifur Rahman Majumder, Lanka Bangla Securities' Director Mahbubul Anam and Pran Agro Limited's Director Uzma Chowdhury were also present at the inauguration ceremony.

The alternative trading platform has 76 open-end mutual funds, 18 equity securities, and 15 debt securities ready for listing, according to sources.

The platform allows for the listing of any public limited company registered in Bangladesh, as well as BSEC-approved debt securities, open-end mutual funds, and alternative investment funds. 

DSE listing approval is required for these listings. However, it is not possible to raise capital by issuing new shares on the alternative trading platform, as is possible on the DSE main market. Only sponsors or existing shareholders are allowed to sell shares, and no more than 49% of a company's shares can be sold. 

To participate in the alternative trading board, securities must be converted into electronic form and deposited with the Central Depository Bangladesh Limited, and companies must also publish regular financial reports and hold annual general meetings.

Investors can purchase securities from the ATB through their beneficiary owners (BO) account in the main market of the DSE, or through brokerage firms of the DSE. 

India and Malaysia also have markets for trading shares of non-listed firms, although these types of securities are traded over the counter (OTC) and are considered risky, especially for ordinary and small investors. In India, institutional investors play a significant role in this market. 

Trading in unlisted shares carries credit risk as the market is not regulated or organised and buyers and sellers of these shares directly trade the instruments through intermediaries. 

The main risk lies in the investment choice itself, as it is uncertain whether the company whose unlisted shares are being bought will go public or not, or whether the price of the shares will increase or the company will fail due to a lack of business. It is recommended to thoroughly analyse the company's fundamentals and other factors before investing in any unlisted share.

BSEC spokesperson and Executive Director Rezaul Karim warned that the Alternative Trading Board is risky for average investors and advised them to conduct research before buying shares on the platform. 

CEO of LankaBangla Securities Khandoker Saffat Reza said financial reports and prospectuses of companies listed on the ATB will not be available, making it risky for ordinary investors. 

To address this issue, LankaBangla Securities plans to launch a web portal that provides information on listed companies to help investors make informed decisions., he added.

To prevent share manipulation, a 4% circuit breaker will be implemented on the first two days of equity share trading, with transactions being closed on the third day and share distribution taking place on that day. 

A 5% circuit breaker will be implemented on the fourth day. 

Besides, profits made from the sale of equity shares within three months of purchase must be deposited in the investor protection fund and cannot be accessed until the shares are sold after a period of three months. 

The CEO of LankaBangla Securities stated that the three-month hold will make it more difficult to manipulate shares. 

Open-end mutual fund transactions will be traded at the price declared by the asset manager.