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INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG

ASSAIGNMENT ON: Formation Activities Transaction Procedures Participants Problems & Role of developing effective capital and money market of DSE& CSE. SUBMITTED FROM: Minhaj uddin. B-091045. Sem:6th,Sec:A. BBA,DBA IIUC. SUBMITTED TO: Tanvir Arif Associate professor DBA,CU.

DHAKA STOCK EXCHANGE

INTRODUCTION:
Dhaka Stock Exchange (Generally known as DSE) is the main stock exchange of Bangladesh. It is located in Motijheel at the heart of the Dhaka city. It was incorporated in 1954. Dhaka stock exchange is the first stock exchange of the country. As of 18 August 2010, the Dhaka Stock Exchange had over 750 listed companies with a combined market capitalization of $50.28 billion.

HISTORY:
First incorporated as East Pakistan Stock Exchange Association Ltd in 28 April 1954 and started formal trading in 1956.It was renamed as East Pakistan Stock Exchange Ltd in 23 June 1962.Again renamed as Dacca Stock Exchange Ltd in 13 May 1964. After the liberation war in 1971 the trading was discontinued for five years. In 1976 trading restarted in Bangladesh, on 16 September 1986 DSE was started. The formula for calculating DSE all share price index was changed according to IFC on 1 November 1993. The automated trading was initiated in 10 August 1998 and started on 1 January 2001.Central Depository System was initiated in 24 January 2004. As of November 16, 2009, the benchmark index of the Dhaka Stock Exchange (DSE) crossed 4000 points for the first time, setting another new high at 4148 points. In 2010, the index crossed 8500 points and finally crashed in the first quarter of 2011. Millions of investors lost their money and came out onto the street blaming the speculators and regulators for the bubble that finally burst. FORMATION: Dhaka Stock Exchange (DSE) is a public limited company. It is formed and managed under Company Act 1994, Security and Exchange Commission Act 1993, Security and Exchange Commission Regulation 1994, and Security Exchange (Inside Trading) regulation 1994. The issued capital of this company is Tk. 500,000 which is divided up to 250 shares each pricing Tk. 2000.No individual or firm can buy more than one share. According to stock market rule only members can participate in the floor and can buy shares for himself or his clients. At present it has 238 members. Market capitalization of the Dhaka Stock Exchange reached nearly $9 billion in September 2007 and $27.4 billion on Dec 9, 2009.

3 ACTIVITIES: Internet trading services: CSE is not only the pioneer of establishment of nationwide trading mechanism. It also extended its network to the abroad by introducing Internet Trading System on 30th May 2004. You may have access to our trading network not only from the premises of our brokers but also from personal computers in your home through the Internet. Internet trading is available on CSE. The CSE network allows its user to use internet as an order routing system for communicating clients orders to the CHITTRA through brokers. Broker can provide this service to their client after obtaining permission from respective stock exchanges. CSE has stipulated the minimum conditions to be fulfilled by brokers to start Internet based trading services.

Chief Executive Officer: The CEO is responsible for implementing the decisions of the Board, the day to day running of the exchange and formulating strategic plans for agreement with the board. Following are the functions of the CEO and the various Departments of CSE: Systems: The Systems Department carries out the following functions: deal with user queries manage communication network manage information technology developments and suppliers manage internal information technology awareness manage trading and operate Vista Settlement System maintain masterfile print daily reports and produce statistics support internal users and setup and train new system user. Settlement Clearance &Dept.: This department is responsible for delivering cheques and shares to members file and withdraw stock from vault deal with bad delivery procedures manage security receive shares from members opening of BO accounts and provide other depository services.

Market Operations: This department carries out the following functions monitor public information monitor, receive and disseminate regular company information on-line surveillance inspection visits to members receive and disseminate price sensitive company information receive and manage investor complaints receive and manage other complaints manage and monitor OTC facilities. Listing Marketing & Educating: This department is responsible for the following arrange training ad hoc legal problems liaison with Securities and Exchange Commission maintain master organogram maintain personnel files and staff list monitor and record leave requests and leave taken monitor rules and regulations monitor, receive and disseminate regular company information respond to requests for information, members queries and complaints. Finance & Administration: This department is responsible for the following: Conducting statutory and management meetings of the company and provide secretarial services relating there to_ *Prepare Annual and periodic Financial Statements. *Prepare Budgets and monitor the income and expenditure with the budget. *Controlling banking operations of the company. *Keeping inventory of the assets of the company. *Managing financial settlement of the trading operations. *Provide MIS to concerned departments. *Payments to different party bills after due verification. *Preparation of payroll of confirmed and casual staff. *Compliance of taxation rules and policies including withholdings,payments and filing of tax returns and documents. *Issuing certificates to brokers and other authorities. *Maintaining IPF(Investors Protection Fund) Accounts. *Oversee the development activities of the Exchange including acquisition and development of properties, schedule payments and coordinate associated activities *Providing support to develop and implement corporate strategies, mission and vision Research, Corporate Development & Information: This department carries out the following functions: *maintain library contents *press cuttings and press relations *produce portfolio and other CSE *publications public relations *investor's information cell .

The major functions are: - 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.

TRANSECTION PROCEDURES: share is done here through automatic matching. Spot Market Spot transactions are done here through automatic matching which must be settled within 24 hours. Block Market A place where bulk quantities of shares are traded through pick and fill basis. Odd Lot Market Odd lot scripts are traded here based on pick and fill basis. DSE can introduce automate monitoring systems that may control price manipulation, malpractices and inside trading. It can make sure all the listed companies publish their annual reports with actual and proper information that can ensure the interest of the investors. To force the listed companies to declare and pay regular dividends through conducting Annual General Meeting. To make arrangement to set up merchant banks, investment banks and floatation of more mutual funds particularly in the private sectors. More banks, insurance companies and other financial institutions should be encouraged to deal in share business directly The management of DSE should be vested with professionals and should not in any way be linked with the ownership of stock exchange and other firms. To train the investors about fundamentals to deal in share transactions.

6 PROBLEMS AND LIMITATIONS OF DSE: It has been observed that the share values of some profitable companies have been increased fictitiously some times that hampers the smooth operation of DSE. Delays of settlement Financing procedures and delivery of securities sometimes take an unusual long time for which the money is blocked for nothing. Irregular payment dividends Some companies do not hold Annual General Meeting and eventually declare dividends that do not reflect the real or actual financial positions of the company and ultimately shareholders become confused. 22 Some members being the directors of listed companies of DSE look for their own interest using the internal information of share market. Improper Financial Statement Many companies of DSE do not focus real position of the company as some audit firms involve in corruption while preparing financial statements. As a result the shareholders as well as investors do not have any idea about position of the company. Technical problems and political infighting The concept of centralization of securities market has not been implemented that arises technical problems and political infighting. 23 2010-11 crash: The bullish market turned bearish during 2010, with the exchange losing 1,800 points between December 2010 and January 2011.[1] Millions of investors have been rendered bankrupt as a result of the market crash. The crash is believed to be caused artificially to benefit a handful of players at the expense of the big players.

MARKET PERTICIPENTS: A few decades ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, usually with long family histories to particular corporations. Over time, markets have become more "institutionalized"; buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds, investor groups, banks and various other financial institutions). The rise of the institutional investor has brought with it some improvements in market operations. Thus, the government was responsible for "fixed" (and exorbitant) fees being markedly reduced for the 'small' investor, but only after the large institutions had managed to break the brokers' solid front on fees. (They then went to 'negotiated' fees, but only for large institutions.[citation needed]) However, corporate governance (at least in the West) has been very much adversely affected by the rise of (largely 'absentee') institutional 'owners'.[citation needed]

ROLE OF DEVELOPING EFFECTIVE CAPITAL AND MONEY MARKET: The primary role of the capital market is to raise long-term funds for governments, banks, and corporations while providing a platform for the trading of securities. This fund rising is regulated by the performance of the stock and bond markets within the capital market. Bangladesh capital market is one of the smallest in Asia but the third largest in the south Asia region. It has two full-fledged automated stock exchanges namely - Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange(CSE). It also consists of a dedicated regulator, the Securities and Exchange Commission (SEC), since, it implements rules and regulations, monitors their implications to operate and develop the capita market. 7 SEC Regulating the CSE and DSE Capital Market Development Program in Bangladesh Strengthening market regulation and supervision Developing the capital market infrastructure Modernizing capital market support facilities Increasing the limited supply of securities in the market Developing institutional sources of demand for securities in the market and Improving policy coordination. To ensure an adequate supply of quality shares of telecommunications, energy and pharmaceutical firms, which are attractive sectors for foreign funds.Surrounding easy access to information and coordination among regulatory bodies that needed attention. Better coordination among the government and relevant agencies. MANAGEMENT : Mr. Syed Sajid Husain Chief Executive Officer (C.C) Mr. Ahmad Dawood Deputy General Manager, Company Secretary & Head of Finance Mr. Md. Ghulam Faruque Deputy General Manager, Dhaka Office Mr. Mohammed Mazbah Uddin Deputy General Manager, Head of Information Technology Services Mrs. Sonia Hossain Assistant General Manager, Legal Affairs Mr. Mohammad Monirul Haque Assistant General Manager, Clearing & DP Services Mr. Md. Mortuza Alam Assistant General Manager, Market Regulation Mr. Maksud-ur-Rahman Assistant General Manager, Market Development and International Relations Mr. Kazi Tanzeeb Shahid Assistant General Manager & Internal Auditor

8 Mr. AKM Shahroze Alam Assistant General Manager, Market Development Mr. Arif Ahmad Assistant General Manager and Head of Human Resource Mr. Kanan Barua Assistant General Manager, Information Technology Services Mr. Hasnain Bari Assistant General Manager, Information Technology Services Mr. Md. Nahidul Islam Khan Assistant General Manager, Membership Mr. Md. Karimullah Manager, Administration Mr. Minhaz U. A Chowdhury Manager, Administration Mr. Md. Khaled Hamidi Manager, Research & Development Mr. Adnan Abdur Raquib THE END