DSE seeks rule relaxation to boost alternative trading board

Infographic: TBS

The Dhaka Stock Exchange (DSE) wrote to the securities regulator for relaxation of some rules for the alternative trading board (ATB) to increase liquidity and ensure fair pricing in the trading platform. 

In its letter to the Bangladesh Securities and Exchange Commission (BSEC) this July, the Dhaka bourse sought the removal of the 90-day bar to sell equity securities to realise gains. 

Also, the DSE wrote instead of fair value, it wants to consider the reference price or yesterday close price (YCP) in calculating the circuit breaker. 

A circuit breaker is an emergency measure established by stock markets that shut down trading activity temporarily or for the rest of the trading day when market prices drop significantly.

According to current ATB rules, if any security is sold within three months after buying it, the realised gain will go to the investors' protection fund of the stock exchange instead of going straight to the investor. 

For this rule, the ATB, which was launched this January with high hopes, has failed to attract investors. At that time, the main market was volatile amid fund shortage. 

Even after eight months of launch, the ATB has only two securities — LankaBangla Securities and Pran Agro Limited Unsecured Guaranteed Bond-1. 

This is why the DSE has sought an issuance of directives from the BSEC regarding these rules. 

If the BSEC allows these changes, more investors will trade in the ATB, according to DSE officials. 

In response to DSE's letter, the securities regulator, on 3 August, instructed the Dhaka bourse to send a final amendment proposal approved by its board of directors along with meeting minutes. 

The BSEC said the amendment proposal should incorporate the viewpoints of protecting investors' interest and also reduce the possibility of price manipulation as much as possible at the ATB.

M Shifur Rahman Mazumdar, acting managing director of the DSE told The Business Standard, "To create a vibrant ATB platform, we sent a letter to the BSEC for postponing the provision of taking gain from trading equity securities within the 90-days."

"Later, the BSEC has instructed us to send a final amendment proposal. The DSE is working on it. After finalising the proposal, we will send it to the regulator," he added.

BSEC Chairman Professor Shibli Rubayat Ul Islam told TBS, "The provision of taking gain within 90 days was kept in the rules for preventing manipulation in the ATB. Now, it seems like a barrier. So, we are working on simplifying policies."

The BSEC said it will take the final decision after receiving the amendment proposal from the DSE. 

According to sources, there are 76 open-end mutual funds, 18 equity securities, and 15 debt securities ready for listing in the ATB. 

However, it is not possible to raise capital by issuing new shares on the ATB, as is possible on the DSE's main platform.

Only sponsors or existing shareholders are allowed to sell shares, and no more than 49% of a company's shares can be sold.