History of Capital Market in Bangladesh:
East Pakistan Stock Exchange transferred in Dhaka in 1958. In 1964 it was renamed as Dhaka Stock Exchange Ltd. In 1976 Dhaka Stock Exchange Ltd started its operation with a bit different version. Securities & Exchange Commission (SEC) was established in 1994 to enhance the efficiency of country’s capital market. A big wing of Bangladesh capital market, Chittagong Stock Exchange (CSE) incorporated in 1995.
After the independence, establishment of Dhaka Stock Exchange (formerly East Pakistan Stock Exchange) initiated the pathway of capital market intermediaries in Bangladesh. In 1976, formation of Investment Corporation of Bangladesh opened the door of professional portfolio management in institutional form. In last two decades, capital market witnessed number of institutional and regulatory advancements which has resulted diversified capital market intermediaries.
At present, Capital Market intermediaries are of following types:
1. Stock Exchanges: Apart from Dhaka Stock Exchange, there is another stock exchange in Bangladesh that is Chittagong Stock Exchange established in 1995.
2. Central Depository: The only depository system for the transaction and settlement of financial securities, Central Depository Bangladesh Ltd (CDBL) was formed in 2000 which conducts its operations under Depositories Act 1999, Depositories Regulations 2000, Depository (User) Regulations 2003, and the CDBL by-laws.
3. Stock Dealer/Sock Broker: Under SEC (Stock Dealer, Stock Broker & Authorized Representative) Rules 2000, these entities are licensed and they are bound to be a member of any of the two stock exchanges. At present, DSE and CSE have 238 and 136 members respectively.
4. Merchant Banker & Portfolio Manager: These institutions are licensed to operate under SEC (Merchant Banker & Portfolio Manager Rules) 1996 and 45 institutions have been licensed by SEC under this rules so far.
5. Asset Management Companies (AMCs): AMCs are authorized to act as issue and portfolio manager of the mutual funds which are issued under SEC (Mutual Fund) Rules 2001. There are 15 AMCs in Bangladesh at present.
6. Credit Rating Companies (CRCs): CRCs in Bangladesh are licensed under Credit Rating Companies Rules, 1996 and now, 5 CRCs have been accredited by SEC.
7. Trustees/Custodians: According to rules, all asset backed securitizations and mutual funds must have an accredited trusty and security custodian. For that purpose, SEC has licensed 9 institutions as Trustees and 9 institutions as custodians.
8. Investment Corporation of Bangladesh (ICB): ICB is a specialized capital market intermediary which was established in 1976 through the ordainment of The Investment Corporation of Bangladesh Ordinance 1976. This ordinance has empowered ICB to perform all types of capital market intermediation that fall under jurisdiction of SEC. ICB has three subsidiaries:
a. ICB Capital Management Ltd.
b. ICB Asset Management Company Ltd.
c. ICB Securities Trading Company Ltd.
1. Shares
2. Debentures
3. Mutual Funds
4. Bonds
5. Derivatives
6. Future & Options
Capital Market Participants:
1. Investors
2. Private Limited Company
3. Stock Exchange (DSE & CSE)
4. Brokers & Dealers
5. Merchant Banks
6. Securities and Exchange Commission (SEC)
7. Central Depository Bangladesh Limited (CDBL)
Capital Market in Bangladesh in total:
Capital market is the market for securities, where companies and governments can raise long term funds. It is a market where money is lent for periods longer than a year. Capital market includes the stock market & the bond market. Our main regulator is Securities and Exchange Commissions (SEC) oversees the capital markets in their designated countries to ensure that investors are protected against fraud.
Capital markets consist of the primary market and the secondary market. The primary markets are where new stocks and bonds are issued and sold (underwriting) to investors. And the Secondary markets are where existing securities are sold and bought from one investor or speculator to another, usually on exchange.
1. Dhaka Stock Exchange.(Number of Registered Trading Members/Brokers is 195)
2. Chittagong Stock Exchange.(Number of Registered Trading Members/Brokers is 124)
Bangladesh capital market is growing day by day, now there are two exchanges with 276 companies, 17 mutual funds, 8 debentures and 112 bonds. The market capitalization of Dhaka Stock Exchanges is BDT 104700 million and the market Capitalization of Chittagong Stock Exchange is BDT 800000 million. The average turnover of both exchanges is now around BDT 5000 million per day.
The Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) deal in the secondary capital market. DSE was established as a public Limited Company in April 1954 while CSE in April 1995. As of 30 June 2000 the total number of enlisted securities with DSE and CSE were 239 and 169 respectively. Out of 239 listed securities with the DSE, 219 were listed companies, 10 mutual funds and 10 debentures.
Read Next: part 3 of Capital markets in Bangladesh
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