1.

1: Background of the Study

This report is an outcome of the course Financial Institution & Markets to relate the
theoretical knowledge that we acquire from the course with the real life situation. Every
semester we have to submit term paper on each course. Actually its a feedback from the side
of the students, who completed the course with the application of theories of course in real life
situation. This time we took the opportunity to study on the capital market specifically Dhaka
Stock Exchange (DSE). In this paper w worked on Dhaka Stock Exchange and try to explain
several aspects. The report will definitely help to know about the Dhaka Stock Exchange

1.2: Objectives of the study

The prime objective of the study is to study and evaluate the trading process of Dhaka Stock
Exchange (DSE). In this regard the specific relevant objectives of study are as follows:

To examine the trading process of DSE.

To know background and management of DSE.

1.3: Methodology of the study

In this study data was collected and information were tabulated, processed and analyzed
crucially in order to make the paper fruitful, informative and purposeful. This paper is based on
secondary data. Most of the information collected from website of Dhaka Stock Exchange and
The Financial Express. In case of analysis collect raw data and various information from
newspaper .

1.4: Limitations of the study

Though we have given utmost effort to prepare this report still there are some limitations of the
study. Such as

Due to short time, we could not collect enough necessary data about the study to
prepare the report.

Information and news are not readily available, so we couldnt analyze many
information to evaluate market efficiency

2.1: Historical Background of the DSE

The necessity of establishing a stock exchange in the then East Pakistan was first decided by
the government when, early in 1952, it was learnt that the Calcutta Stock Exchange had
prohibited the transactions in Pakistani shares and securities. The Provincial Industrial
Advisory Council of Pakistan soon thereafter set up an organizing committee for the formation
of a stock exchange in East Pakistan.. It was suggested that Dhaka Narayanganj Chamber of
Commerce & Industry should approach its members for purchasing the membership cards at
RS.2000 each for the proposed stock exchange. It was thought that the location of the
exchange should be either at Dhaka, Narayanganj or at Chittagong. An organizing committee
was appointed consisting of leading commercial and industrial personalities of the province
with Mr. Mehdi Ispahani as the convener in order to organize the exchange.
The chamber informed its members and members of its affiliated associations of the
proceedings of the above meeting, requesting them to intimate whether they were interested in
joining the proposed stock exchange The meeting invited 8 gentlemen to become promoters of
the exchange with Mr. M Mehdi Ispahani as the convener and authorized them to draw up the
memorandum and article of association of the exchange and proceed to obtain register under
the companys act 1913. The other 7 promoters of the exchange were Mr. J M Addision-Scott,
Mr. MhodammedHanif, Mr. A C Jain, Mr. A K Khan, Mr. M Shabbir Ahmed and Mr.
SakhawatHossin.
The 8 promoters incorporated the formation as the East Pakistan Stock Exchange Association
Ltd. on April 28, 1954 (28.04.1954). As public limited company the name was revised to East
Pakistan Stock Exchange Ltd on June 23, 1962 (23.06.1962). Again on 14.05.1964 the name of
East Pakistan Stock Exchange Limited was changed to "Dhaka Stock Exchange Ltd."
At the time of incorporation the authorized capital of the exchange was RS. 300000 divided
into 150 shares. Of RS. 2000 each and by an extra ordinary general meeting held on
22.02.1964 the authorized capital of the exchange was increased to TK. 500000 divided into
250 shares of TK. 2000 each. The paid up capital of the exchange now stood at TK.460000
divided into 230 shares of TK. 2000 each. However 35 shares out of 230 shares were issued at
TK. 80,00,000 only per share of TK. 2000 with a premium of TK.
79,98,000.Althoughincorporated in 1954, the formal trading was started in 1956 at
Narayanganj after obtaining the certificates of commencement of business. But in 1958 it was
shifted to Dhaka and started functioning at the Narayangonj Chamber Building in Motijheel
C/A.
On 1.10.1957 the stock exchange purchase a land measuring 8.75 kattah at 9F Motijheel C/A
from the government and shifted the stock exchange to its own location in 1959.

2.2: The Organ gram of DSE: The organogram of Dhaka Stock Exchange are given
below

BC
oh
a
ri
dr
om
fa
dn
r
e
cc
t
o
r
s

Chart 1: Flowchart of DSE

2.3:List of Securities:
Listing is necessary in order to trade in the market. List of security/companies (Industry wise)
given below:
#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

Name of the Industry

Bank
Cement
Ceramics Sector
Corporate Bond
Debenture
Engineering
Financial Institutions
Food & Allied
Fuel & Power
Insurance
IT Sector
Jute
Miscellaneous
Mutual Funds
Paper & Printing
Pharmaceuticals & Chemicals
Services & Real Estate
Tannery Industries
Telecommunication
Textile
Travel & Leisure
Treasury Bond

Total Companies:

Quantity
30
7
5
2
8
32
23
18
18
46
6
3
12
41
2
27
4
5
2
41
4
221
557

2.4: Daily Market Performance

Performance of eachlisted companies and market as whole is available are available on the web
site, also they maintain archive of past transaction data regarding performance of both each
company and market as whole. Market performance of October 19, 2015 is given below:
From the picture given below its easy to determine the whether market is performing good or
not compared with previous days performance. We can see that the market performance of
October 19, 2015 is better than the of October 18, 2015 as the DSEX index shows much
higher. On October 19, 2015 there was a total trade of 82306 and the volume was 89761030
which value in taka is 3358.018 million. The graph shows the hourly DSE broad index change
and there is a list which gives the information about which companys share price is highest.
On October 19, 2015 British American Tobacco holds the first position though its share price
change is negative.

Other information like top ten gainer company and also top ten losers are given on the web
site. Following shows Top Ten Gainer Considering Close Price & YCP on Oct 19, 2015 at
14:55:15
#

TRADING CODE

CLOSEP*

HIGH

LOW

YCP*

% CHANGE

LAFSURCEML

90.1

90.9

83.2

83.1

8.4236

PARAMOUNT

12.1

12.2

11.9

11.2

8.0357

ZAHINTEX

25.3

25.7

23.4

23.7

6.7511

NORTHERN

306.9

309.9

292.5

289.1

6.157

CENTRALPHL

24.9

25.0

23.5

23.5

5.9574

IFADAUTOS

110.6

111.8

105.2

104.6

5.7361

1STICB

1508.1

1518.0

1500.0

1430.1

5.4542

APEXFOODS

110.1

110.8

105.0

104.6

5.2581

NPOLYMAR

108.9

109.9

104.9

103.8

4.9133

10

MJLBD

90.1

90.8

86.0

86.0

4.7674

Table 1: Top Ten Gainer Considering Close Price & YCP on Oct 19, 2015 at 14:55:15

3.1: Trading Process

The stock market is one kind of capital market where the stocks are of the different
companies are traded. DSE, floor trading was started with open cry-out auction system. Now
trading has become automated, led by the DSE through the central depository. In the present
automated trading environment, bids/offers, depth, and required broker particulars are all
recorded and can be retrieved for future reference.

3.2: Types of Stock Market:

There are two types of stock markets such as,
Primary market
Secondary market
3.2.1: Primary Market of Trading System
In primary market the following elements are observed:
Initial public Offer (IPO)
B/O Account
How to apply for IPO
IPO distribution system
Refund warrant / allotment of IPO
Sell / hold
How an NRB apply for IPO
What to know before applying for IPO
All of these are discussed below:
Initial public Offer (IPO): Initial public Offer (IPO) means first offering of security by an
issuer to the general public.
Opening process of B/O Account:
Collect B/O Account opening form from a depository participant.
Fill it up, sign it, enclose to recent color pp size photograph and photocopy of
nationality certificate / passport and a certificate from the manager of the bank
account.
Submit it to the concerned DP along with charges.
The DP will input your data into the online server of CDBL.
CDBL server will automatically produce a 16 digit account number like
1525685464653145
How to apply for IPO
We will get information from newspaper, stock exchanges, broker offices, web sites of SEC,
DSE and the issuers, also from DSE publications.
How to apply
Collect IPO application form from DSE or its broker offices Bankers to the issue.
Fill it up, sign it.
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 Submit the form along with the subscription money to the selected bank.
Collect the bankers acknowledgement.
Wait for lottery.
IPO distribution system
Any of the three situations may arise
Over- subscribed
Under- subscribed
Subscribed fully

Situations

Distribution System

Over- subscribed

Lottery

Under- subscribed

Distributed to the public + under writers (If

subscribed by less than 50%, return to the
public)

Subscribed fully

Distribute as supply

Refund Warrant /Allotment of IPO:

If your application is successful in the lottery, the issuer shall deposit your shares in your
concerned B/O account.
If not successful in the lottery the issuer shall refund your subscription money by account
payee Cheque or warrant payable to applicant.
Then you have to deposit the refund warrant to your bank for clearance. Thus your money
will be returned. So there is no loss in the IPO.
Sell / Hold:
Check the B/O account and take a statement of holdings.
Now, one can sell the shares or hold it.
If you sell it, get capital Gain, if you hold its price may rise and may get dividend or stocks.
The particulars need to know before applying for IPO:
Profitability, cash flow and financial solvency, if available
Estimated profit and cash flow.
Companys product is technical one
Companys sponsors have good financial track record and are not loan or tax
defaulters.
Share issue price is as per net asset value and present income based value.
Has the company long-term loan from BSB and BSRS?

 Any foreign investors portfolio in the company.

3.2.2: Secondary Market Trading System
This is well known as stock exchange, is a secondary market a trading market. It is
structured to provide liquidity and marketability to the security industry.
It is a market where you can buy and sell stocks.
We shall discuss here:

How can I start?

What to know before investing?
Places to the complaints
How DSE helps you?

Procedure of secondary market trading:

Contact with a stock broker

Open a client account and a B/O account
Observe first and study the market.
Place your buy / sell order.
Get buy / sell confirmation.
You can hold it or sell it if price increases.
If you hold it you may get cash dividend or stock dividend.

Before starting secondary business we should observed Fundamental analysis

Technical analysis
Fundamental analysis:
Fundamental analysis is the process of looking at a business at the basic or fundamental
financial level. This type of analysis examines key ratios of a business to determine its
financial health and gives you an idea of the value of its stock.
Many investors use fundamental analysis alone or in combination with other tools to
evaluate stock for investment purposes. The goal is to determine the current worth and more
importantly, how the market values the stock.
Technical analysis:
Technical analysis is a method of evaluating stocks by analyzing statistics generated by
market activity, past prices and volume. Technical analysis do not attend to major a
securitys intrinsic value, instead they look at stock charge for patterns and indicators that
will determine a stocks future performance. Technical analysis has become increasingly
popular over the past several years, as more and more people believe that the historical
performance of a stock is a strong indication of future performance
8

3.2.3: Floechart of Trading

Trading flow chart is given below

Flowchart2: Trading flow chart of DSE

In regulation section we mention only listing regulation and thesettlement of transaction

regulation
4.1.2: Listing of Units of Mutual Fund
The following documents are required for listing of units of mutual fund:
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Provided that the documents and information already submitted to the Exchange at
the time of application for public offering in accordance with the public issue rules or
rules relating to mutual funds are not required to submit hereunder again:
(i) Listing application under Securities and Exchange Ordinance,
1969 (Ordinance No. XVII of 1969) as prescribed (Annexure-4
under Schedule-A),
(ii) Form for submission of undertaking and payment of fees as prescribed (Annexure-3
under Schedule-A);
(iii)

An unconditional undertaking on non-judicial stamp paper as prescribed

(iv)An undertaking to provide net asset value (NAV) per unit at cost and market price to
the Exchange and post the same at the official website of the asset manager on weekly
basis as well as post the
(v) Certified true copy of the certificate of incorporation of asset manager ;
(vi)Certified true copy of the certificate of commencement of business of asset manager;
(vii) Certified true copy of the registration certificate to carry on asset management
services by the Commission;
(viii) A copy of the resolution passed by the Trustee Board approving the listing of units
of the fund on the Exchange;
4.1.3: Listing of Debt Securities
The following documents and particulars duly certified by the Managing Director or
Chief Executive Officer or authorized person(s) of the issuer of debt securities shall be
submitted to the Exchange at the time of application for listing or any time on demand by
the Exchange:
Provided that the documents and information already submitted to the Exchange at
the time of application for public offering in accordance with the Public Issue Rules or the
Securities and Exchange Commission (Private Placement of Debt Securities) Rules, 2012
are not required to submit hereunder again :
(i) Application for listing as prescribed (Annexure-7 under Schedule-A);
(ii) Memorandum & Articles of Association of the issuer or such other documents;
(iii)

Copy of the certificate of incorporation of the issuer or such other documents;

(iv)Copy of the certificate of commencement of business of the issuer or such other

documents;
(v) Copies of relevant approval of concerned Ministry/ Government Authority/Statutory
Body/Bangladesh Bank/ Local Authority, if required;
(vi)Copy of the feasibility report, in case of funding a new project;
(vii)

Copy of resolution of Board of Directors/competent authority of the issuer

authorizing the listing application;

10

4.1.4: Requirements Concerning Capital and Operation

The concerned applicant
(i) shall have minimum paid up capital of Taka 300 (three hundred) million;
(ii) shall have no accumulated loss;
(iii)

years;

shall be in commercial operation for at least immediate last 5 (five)

(iv)shall have profit in 3 (three) years out of the immediate last 5 (five) completed
accounting/financial years with steady growth pattern;
4.1.5: Direct Listing/Re-listing Procedures
(1) The company shall make application (Annexure -8 under Schedule-A) to the
Exchange along with the copies of documents mentioned under sub-regulation (2)
with an application fee of Taka 50,000.00 (fifty thousand) only. The Company shall
simultaneously furnish copies of application and documents to the Commission.
(2) The company shall, among others, submit the copies of following documents duly
attested by the Managing Director/Chief Executive Officer/authorized person :
(a) Memorandum of Association and Articles of Association certified by Registrar
of Joint Stock Companies and Firms.
(b) A brief profile of the company, including brief particulars of existing sponsor
directors of the company.
(c) Certificate of incorporation and certificate of commencement of business
certified by Registrar of Joint Stock Companies and Firms.
(d) Audited financial statements for the last five years.
(e) Members/shareholders list together with their shareholding position.
(f) Return of allotment of shares certified by the Registrar of Joint Stock Companies
and Firms.
(g) Existing material agreements, including deed of mortgage, if any.
(h) Status of loan, including information concerning loan default, if any, of the
company.
(i) VAT Registration and Taxpayers Identification Numbers.
(3) Upon receipt of the application, the Exchange shall examine and inform the
issuer within 15 (fifteen) days from the receipt of the application, with a copy
to the Commission, to remove the deficiencies, if any, within 30 (thirty) days
from the date of receipt from the Exchange.
(4) The Exchange shall list the shares, within 15 (fifteen) working days of
fulfillment of all requirements by the issuer, following the procedures as
mentioned in this regulation, under intimation to the Commission.
Member shall be liable to pay a fine to DSE for each default as per the following schedule:
11

_________________________________________________________________
__________
For value equivalent
Fine per day
__________________________________________________________
_________________
Up to Tk. 1 (One) lac

Tk. 5,000

Above Tk. 1 (One) lac up to Tk. 2 (Two) lac

Tk. 7,500

Above Tk. 2 (Two) lac and up to Tk. 10 (Ten) lac

Tk. 10,000

Above Tk. 10 (Ten) lac and up to Tk. 50 (Fifty) lac

(Fifty) lac and up to Tk. 1 (One)
Above Tk. 50 crore

Tk. 25,000

Above Tk. 1 (One) crore

Tk. 50,000
1%
of
default
amount

the

5.1: Findings:
From the above analysis we can see that the information or news, whether company specific or
others, share prices doesnt change significantly. For every information taken from The
Financial Express I collect share price for subsequent ten days after publication of news for
the company or selected companies of an industry which is related with the news.Only last
news, show positive result, that is the share price reflect the information.Others do not shows
that much reflection of information.

5.2: Recommendation: As the market is not efficient following action can be taken to improve
the efficiency of market.
1. Ensure asymmetric information among all investors
12

2. Can go for conducting various events that will describe various aspect of market
3. DSE can open a department which will handle regarding market information and spread
information among investors.
4. Proper implication of rules of regulatory commission.
5. Provide investor with required information, so that they can easily make decision.

5.3: Conclusion: Stock exchanges are absolutely important for the proper functioning of
capitalistic economy. Capital markets serve to transfer capital form the surplus units to the
deficit units. That plays an important role by mobilizing the funds to these who can make a
proper and productive use of the sale. They also help the surplus units to be capable of earning
returns by serving the economy to utilize their idle funds in accelerating the economic
emancipation through employment generation. In such a manner the financial institutions
especially the organized stock exchanges contribute to the industrialization to the country. So
its very much important to increase the efficiency of Dhaka Stock Exchange.

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