DSE extends deadline to June for brokers' uneditable back-office software rollout

Failing to implement the much-discussed uneditable back-office software within the stipulated time frame, the Dhaka Stock Exchange (DSE), with approval from the Bangladesh Securities and Exchange Commission (BSEC), has extended the software's rollout by two months, until June.

The initial deadline for installing the new back-office software was set for December 2024. Later, upon the request of the DSE and the DSE Brokers Association (DBA), it was extended by four months to April this year.

At the time of granting the extension, the commission, in a letter to the DSE, clearly stated that the deadline would not be extended under any circumstances, warning that failure to implement the new software by then would result in detachment from trading activities starting 1 May, along with additional regulatory penalties. 

Despite the warning, the DBA again requested the DSE to seek another four-month extension until August. On 29 April, the DSE wrote to the BSEC detailing the challenges and requesting a new deadline.

According to a BSEC press release on Wednesday, out of 291 brokerage houses in the DSE and Chittagong Stock Exchange (CSE), 113 have implemented the tamper-proof back-office software, while 178 are in the process of doing so. 

Additionally, out of 82 brokerage houses in the CSE, 28 have fully implemented the software, and 15 are in the process.

A DSE official, seeking anonymity, told The Business Standard, "As half of the brokers implemented the software within the timeframe, we believed the remaining ones would be able to do the same if the deadline is extended by a few more months. 

"That is why the DSE requested BSEC for an extension until August. But the commission extended it by only two months."

On Wednesday, in a circular sent to managing directors and chief executive officers of all brokerage houses, the DSE wrote, "The BSEC graciously extended the deadline for the full implementation of the uneditable back-office software until June."

"Accordingly, all companies that have not yet fully implemented the software – whether developed in-house or provided by empanelled vendors – are requested to ensure complete implementation by the extended deadline," it added.

Back-office software is used by brokerage firms to manage internal operations, including maintaining detailed records of transactions and balances with clients and other parties.  

However, some firms have exploited loopholes in the system. 

Tamha Securities, for instance, was found to be operating multiple sets of back-office software years after establishment, using the arrangement to conceal embezzlement of client assets. By feeding fake data into one of the systems, the firm was able to deceive both regulators and clients.

In response to such incidents, the BSEC introduced a policy requiring all brokerage houses to adopt an uneditable back-office software. Only eight vendor firms that passed regulatory scrutiny were allowed to provide the software.  

According to DSE officials, the new system prohibits the backdating of data entries, effectively closing a loophole that allowed manipulations like those seen in the Tamha Securities case.