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Capital Market of Bangladesh

Essay by   •  July 29, 2013  •  Research Paper  •  1,714 Words (7 Pages)  •  1,474 Views

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As a Financial Institutions, Brokerage Houses are the key source of financing in capital or Share Market in Bangladesh. In Bangladesh, There are two Major Stock Exchanges. They are Dhaka Stock Exchange and Chittagong Stock Exchange. Both stock Exchanges are come into existence as capital market regulator through promulgation of the Securities and Exchange Commission Act 1993 Basically; Stock Exchange is the market of Secondary Shares of Public Listed Companies. Public Limited Companies' is enlisted and collects Capital from Market by offering Initial Public Offering (IPO). After enlisted, their companies' shares are exchanged in secondary market. And for exchanging those companies' shares Brokerage or different securities play a very important role in the economy. In Bangladesh, Now there are around 245 Securities or Brokerage Houses in Bangladesh. In following we will discuss about a particular Securities daily Trading Policies in capital market, their activities as a financial institutions, Current status of Share Market of Bangladesh, Financial Crisis of Bangladesh capital market, Scope of going stable in the Current economy, etc.

As a part of our Course materials, I have personally visited to Securities named "IFIC Securities Limited". It is situated in ABC Tower, in Uttara. It was a pleasure and nice conversation with Mr. Tajul Islam, officer in charge of that Securities. He helped me a lot to fill up my queries with patience and gave me a bunch of information about their activities, trading policies, problems, and reasons of financial crisis in capital market and scope of going stable in Stock market. IFIC Securities is a subsidiary Financial Institutions of IFIC bank Ltd. To do business as securities in Stock Exchange market, they have to get a License from Securities Exchange Commission. This License is called as Broker License. They do business by trading shares on behalf of their clients and earn commission. Mainly they play as a broker in stock exchange market. They mainly earn commission for each trading of their clients and it is 0.4% of each transaction. This is the main source income of all the securities. As their daily operation activities IFIC Securities do the following:

1) Opening Beneficiary Account of clients for Share Market.

2) Buy/Sell of Shares of public Ltd. Companies in Secondary market.

3) Buy/sell of Shares through CDBL process. Mainly the electronic Process maintained by Security Exchange Commission.

4) Training Session or workshop for their investors to grow awareness about Stock Exchange market.

* Source of Income of IFIC Securities:

Basically all the Securities or Brokerage house do income from earning Commission.

Apart from that, now securities are offering loan for their investors to invest in Capital market. From the loan securities earn interest. By giving loan, IFIC securities also do the broker activities. They borrow loan from the bank at a particular rate of interest and giving loan to their investors at high interest rate. The difference of interest rates is another source of income of IFIC Securities. Securities can also be the investors of Capital Market. For that, they have to apply for Dealer license to SEC. By dealer license, securities can trade in secondary market from their own identity. In that particular, the clients of this account will be the directors of the securities.

* Merchant Banking & Portfolio Management:

Apart from buy/sell of Clients shares, Securities also do business by Merchant Banking. The idea of Merchant Banking is to do business with the other brokerage house. In brief, not all the Securities can do Merchant banking. To do Merchant Banking, securities have to get a license from the Bangladesh bank. After getting the license, Securities can borrow loan from bank and also from investors by offering interest to them. For Merchant banking Securities do not need to open any particular BO account. They do business by trading on behalf of the customer all the time. Basically in Merchant banking, Securities invest in their clients' accounts and maintain a good category of Shares. This process is called portfolio management. By deed, clients give the Securities the authority to trade on their accounts and for that securities claim a commission for that. Merchant Banking is the non-banking activities of Securities.

* Problems occur during Trading:

Clients are the main Source of Income of the Securities. Securities expect and want active investors who trade on regular basis. Silent investors are those who hold a share for a long time to earn the highest profit. IFIC securities always believe to maximize the investors' portfolio by minimizing the risk. For that they organize Training Session for their clients to grow awareness and enhance knowledge about the stock market. Securities believe trading Share constantly is profitable than purchase and holding for a long time. After all of that, during trading, securities face different types of problem from the clients. Some are,

- Clients invest on basis of rumors.

- Maximum Clients do not have clear idea about the basic requirements of purchasing of share.

- They do panic on fall down of share price, thus do not invest all the time.

- Lack



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