Definition: Financial Market refers to a marketplace, where creation and trading of financial

assets, such as shares, debentures, bonds, derivatives, currencies, etc. take place. It plays a
crucial role in allocating limited resources, in the country’s economy. It acts as an intermediary
between the savers and investors by mobilising funds between them.

The financial market provides a platform to the buyers and sellers, to meet, for trading assets at a
price determined by the demand and supply forces.

Classification of Financial Market

By Nature of Claim

Debt Market: The market where fixed claims or debt instruments, such as debentures or bonds
are bought and sold between investors.

Equity Market: Equity market is a market wherein the investors deal in equity instruments. It is
the market for residual claims.

By Maturity of Claim

Money Market: The market where monetary assets such as commercial paper, certificate of
deposits, treasury bills, etc. which mature within a year, are traded is called money market. It is
the market for short-term funds. No such market exist physically; the transactions are performed
over a virtual network, i.e. fax, internet or phone.

Capital Market: The market where medium and long term financial assets are traded is a capital
market. It is divided into two types:

Primary Market: A financial market, wherein the company listed on an exchange, for the first
time, issues new security or already listed company brings the fresh issue.

Secondary Market: Alternately known as Stock market, a secondary market is an organised

marketplace, wherein already issued securities are traded between investors, such as individuals,
merchant bankers, stock brokers and mutual funds.

By Timing of Delivery

Cash Market: The market where the transaction between buyers and sellers are settled in real
time.

Futures Market: Futures market is one where the delivery or settlement of commodities takes
place at a future specified date.

By Organizational Structure
Exchange Traded Market: A financial market, which has a centralised organisation with the
standardised procedure.

Over-the-Counter Market: An OTC is characterised by a decentralised organisation, having

customised procedures.

Overview of Financial system of Bangladesh:

Formal Sector: The formal sector includes all regulated institutions like Banks, Non-Bank
Financial Institutions (FIs), Insurance Companies, Capital Market Intermediaries like Brokerage
Houses, Merchant Banks etc.; Micro Finance Institutions (MFIs).

Semi-Formal Sector: The semi formal sector includes those institutions which are regulated
otherwise but do not fall under the jurisdiction of Central Bank, Insurance Authority, Securities
and Exchange Commission or any other enacted financial regulator. This sector is mainly
represented by Specialized Financial Institutions like House Building Finance Corporation
(HBFC), Palli Karma Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc., Non
Governmental Organizations (NGOs and discrete government programs.

Informal Sector: The informal sector includes private intermediaries which are completely
unregulated.

The financial market in Bangladesh is mainly of following types:

Money Market: The primary money market is comprised of banks, FIs and primary dealers as
intermediaries and savings & lending instruments, treasury bills as instruments. There are
currently 15 primary dealers (12 banks and 3 FIs) in Bangladesh. The only active secondary
market is overnight call money market which is participated by the scheduled banks and FIs. The
money market in Bangladesh is regulated by Bangladesh Bank (BB), the Central Bank of
Bangladesh.

Capital market: The primary segment of capital market is operated through private & public
offering of equity and bond instruments. The secondary segment of capital market is
institutionalized by two (02) stock exchanges-Dhaka Stock Exchange and Chittagong Stock
Exchange. The instruments in these exchanges are equity securities (shares), debentures,
corporate bonds and treasury bonds. The capital market in Bangladesh is governed by Securities
and Commission (SEC).

Foreign Exchange Market: Towards liberalization of foreign exchange transactions, a number

of measures were adopted since 1990s. Bangladeshi currency, the taka, was declared convertible
on current account transactions (as on 24 March 1994), in terms of Article VIII of IMF Article of
Agreement (1994). As Taka is not convertible in capital account, resident owned capital is not
freely transferable abroad. Repatriation of profits or disinvestment proceeds on non-resident FDI
and portfolio investment inflows are permitted freely. Direct investments of non-residents in the
industrial sector and portfolio investments of non-residents through stock exchanges are
repatriable abroad, as also are capital gains and profits/dividends thereon. Investment abroad of
resident-owned capital is subject to prior Bangladesh Bank approval, which is allowed only
sparingly. Bangladesh adopted Floating Exchange Rate regime since 31 May 2003. Under the
regime, BB does not interfere in the determination of exchange rate, but operates the monetary
policy prudently for minimizing extreme swings in exchange rate to avoid adverse repercussion
on the domestic economy. The exchange rate is being determined in the market on the basis of
market demand and supply forces of the respective currencies. In the forex market banks are free
to buy and sale foreign currency in the spot and also in the forward markets. However, to avoid
any unusual volatility in the exchange rate, Bangladesh Bank, the regulator of foreign exchange
market remains vigilant over the developments in the foreign exchange market and intervenes by
buying and selling foreign currencies whenever it deems necessary to maintain stability in the
foreign exchange market.

Capital Market

the part of a financial system concerned with raising capital by dealing in shares, bonds, and
other long-term investments.

FY 2016-17 FY 2015-16 FY 2014-15 FY 2013-14 FY 2012-13

Statement of Income

Revenue 2,082 1,871 1,949 1,925 1,719

Expenses 737 673 602 585 564

Net profit before tax 1,345 - - - -

Net profit after tax 1,239 1,198 1,346 1,340 1,155

Statement of Cash Flows

Cash flows from operating activities 616 485 359 242 74

Statement of Financial Position

Current assets 4,707 4,914 2,330 1,714 2,351

Current liabilities 4,476 4,454 1,492 908 1,870

Non current assets 9,677 9,397 9,000 8,732 7,947

Non current liabilities 440 400 376 367 357

Financial Ratios

Current ratio 1.05 1.10 1.56 1.89 1.26

Net profit margin (%) 60 64 69 70 67

Return on equity (%) 6.23 5.86 6.39 6.79 6.29

Return on total assets (%) 4.99 4.73 5.87 6.38 5.61

Operating cash flow per share0.34 0.27 0.2 0.13 1,477

Ordinary Shares Information

Authorized capital 25,000 25,000 25,000 25,000 0.5

Paid up share capital 18,037 18,037 18,037 18,037 0.5

Face value per share 10 10 10 10 2,000

Number of shares 1,803,776,500 1,803,776,500 1,803,776,500 1,803,776,500 250

Earnings per share (EPS)* 0.69 0.66 0.75 0.74 0.64

Net assets value (NAV) per share* 11.03 11.34 11.68 10.93 10.19

Cash dividend on paid-up capital - 10% 10% 0 0

The financial performance during the year 2016-17 was improved mainly due to increase of
transaction income. In the financial year 2016-17 the Exchange made a net income of Tk. 1,239
million. This is an increase of 3.42 percent compared to 1,198 million recorded in 2015-16. Fees
and non-interest income of the Exchange however recorded an increase from Tk. 800.24 million
to Tk. 1,211.63 million over the preceding year.

In 2016-17 financial year, average turnover was BDT 7,553.23 million and net profit of DSE was
BDT 1,239 million.s
VISION

To be the leading exchange in the region

and a key driver of economic growth with state-of-art technology and world class service to
ensure highest level of confidence

among stakeholders

MISSION

Proactive approach to keep pace with continuous technological advancement,

and providing highest standard of service through efficiency improvement and introduction of
new products.

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.

Money Market