Evalute The Trading System of Dhaka Stock Exchange

Chapter One
Introduction
1
Dissertation Report On Evaluate the Trading System of Dhaka Stock Exchange (DSE)
Prepared By Md. Mahbub Alam
1.1
Background of the Problem :
The capital market is the engine of growth for an economy, and performs a crucial role in acting
as an intermediary between savers and companies seeking additional financing for business
expansion. Stock market is part & parcel of capital market. Contribution of any stock exchange
generally leads to economic growth by increasing the funds to finance industry and other
enterprise.
Stock Exchange is an autonomous body formed by shareholders/members. It can take various
decisions independently. The objective of Stock Exchange is to provide a market place along
with facilities for bringing together the buyers and sellers of securities, promote just and
equitable principles of trade, protect the interest of the investors.
Historical Background of the Dhaka Stock Exchange:

Dhaka stock exchange is the main stock/share market in Bangladesh. Its the first stock market
launched in Bangladesh. Dhaka stock exchange started its journey in 1954. At that time there
was no digitalized stock market in Bangladesh, only handmade paper was available. But now
there are over 750 companies are involved in share market and our stock market is fully
computerized though we all cant buy/sell from home but actually transaction is happening over
the computer.
Our stock market named was Stock Exchange Association Ltd in 1954 and started its journey
from East Pakistan. First formal trading started in 1956. After six years of trading its name was
renamed to East Pakistan Stock Exchange Ltd, remember it was in 23 June, 1962. Two
years passed and in 13th may 1964 again it was renamed to Dacca Stock Exchange Ltd. We
all know that our liberation year took place in 1971, a nasty war killed many Bangladeshis, and
so the market collapse at that time and it didnt operate for five years. In 1976, share market got
its life back and started its journey in a free country named Bangladesh.
Now in this twentieth century there are two main stock market in Bangladesh, One is called
DHAKA STOCK EXCHANGE and other one is called CHITTAGONG STOCK
EXCHANGE. The automated trading was initiated in 10 August 1998 and started on 1 January
2001. Before 1998 there was all papers, no perfect calculation was there. One can apply for
several times for a primary share, share prices were increasing by people mouth to mouth, above
all before 1998 there was high manipulated game going on our stock market. As a result its
collapsed in 1996, many people became hopeless, they were terrified, and they didnt want to get
involved again in share market. Moreover, they became angry if someone talked about share
market! This is the truth, these things really happened in 1996. There was very low volume trade
2
going on. There was no manipulation game after the crash. People almost forgot about stock
market.
After years of struggling Central Depository System was initiated in 24th January 2004.
People got confident again about the stock market because all things were computerized. They
were again involving themselves in stock market. The volume of returning investors were quite
low but there were new investors coming forward to the share market. Its started bubbling from
2005.
As of November 16, 2009, the benchmark index of the Dhaka Stock Exchange (DSE) crossed
4000 points for the first time; everyone was talking about share market again. There were no
specific categories of people; everyone was trying to get involved in share market. Either they
have knowledge about stock market or not they need to involve making good money from the
market. In 2009, share market means easy profit actually 100% profit, all shares prices were
increasing day by day. No signal of any fall or wrong movement. Bubbling, Bubbling,
Bubbling. Money was forwarding to share market from every possible sector. Do you
remember what happened in 1996? Exactly the same thing was happening in 2009, though the
stock market was computerized but what do you think is going to happen if you are pouring
water on a jog continuously? In 2010, the index crossed 8500 points, it almost reached 9000
point! Then all of a sudden we have seen 600 indexes fall on a single day though it was
recovered by 550 points that day but thats the first signal of crash 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.
This is 2015 now. Four years passed! But DSC & CSC is still not in stable condition. Investors
are still confused, frustrated and sometimes hopeless. Many investors died or left the market after
the crash. We all wish and hope that the market will get the stability in upcoming days.
3
Function of Dhaka Stock Exchange
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.
Mission of Dhaka Stock Exchange

The Dhaka stock exchange will create a successful well-organized and transparent market of
international standard to save and invest in Bangladesh in order to facilitate the competent
entrepreneurs to raise capital and speed up industrial growth for overall benefit of the economy.
Objectives of Dhaka Stock Exchange

The prime objective of the DSE is to create a nation-wide stock market also beyond the national
boundary, which will simultaneously act as a platform for industrial entrepreneurs and general
investors. Explicitly the objectives of DSE are following:
To develop a strong platform for the entrepreneurs for raising capital.

To provide an investment opportunities for small and large-scale investors.
To develop a transparent market ensuring investors interest.
To provide a fully automated trading, Clearing and settlement system to ensure quick,
easy, accurate and easily accessible to all transactions.
To attract non-resident Bangladeshis to invest in Bangladesh Stock market.
To attract foreign institutional investors to invest in Bangladesh stock market.
To collect, preserve and disseminate data and information on stock market.
To develop a corporate culture through mandatory corporate membership.
To develop a research cell for analyzing status of the market and economy.
4
1.2 Statement of the Problem

The key problem of this topic is the trading system of DSE. We can find out from this report who
is the benefited by investing money in The DSE. What facilities provide DSE? Why we invest
money in DSE? What impact in our economy? What is the system of trading? Who can trade?
What is brokerage house? Why brokerage house need for trading?
Basically through this report we will be able trace out a concrete idea about the topic entitled in
this report.
1.3 Purpose of the study

The prime objective of the study is to study and evaluate the trading system of DSE. In this
regard the specific relevant objectives of study are as follows:
To examine the trading system of DSE.

To know growth, development, organization and management of DSE.
To examine current issues of DSE.
To evaluate trading order and settlement system of DSE.
To identify the problems and prospects of DSE.
1.4 Importance of the study:

Trading system is one of the most important functions of stock market operation. This report tries
to find out the trading system of Dhaka stock exchange. Stock market is an essential part of
capital market. Trading has now become automated, led by the Dhaka Stock Exchange 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.
5
1.5 Scope of the study

The scope of this report is to find out the overall performance of DSE in the stock market. The
report is basically divided into two parts:
The Organization Part
The Analysis Part
The organization part of the report gives an overview of Dhaka Stock Exchange. It focuses upon
the history of DSE, formation, management, objectives of DSE and functions of DSE. The study
also concentrates upon the different functions performed by DSE including surveillance
activities.
The analysis part of the report basically evaluate the performance of Dhaka Stock Exchange
through different performance measurement indicators such as performance of different indices,
IPO offering, performance of enlisted securities, DSE turnover, market capitalization etc. in the
last portion some finding of the present problems of DSE and some recommendations are
addressed.
1.6 Definition of terms

A Depository defined as: A facility for holding securities, which enables securities transactions
to be processed by book entry. Physical securities can be immobilized by the depository or
securities may be dematerialized (so that they exist only as electronic records).
A security traded in some context other than on a formal exchange such as the NYSE, TSX,
AMEX, etc. The phrase "over-the-counter" can be used to refer to stocks that trade via a dealer
network as opposed to on a centralized exchange. It also refers to debt securities and other
financial instruments such as derivatives, which are traded through a dealer network.
The first sale of stock by a private company to the public. IPOs are often issued by smaller,
younger companies seeking the capital to expand, but can also be done by large privately owned
companies looking to become publicly traded.
An automated trading system (ATS) is a computer program that creates orders and
automatically submits them to a market center or exchange.
Internet trading system is the act of placing buy/sell orders for financial securities and/or
currencies with the use of a brokerage's internet-based proprietary trading platforms. Stocks,
bonds, options, futures and currencies can all be traded online.
6
Chapter Two
Literature Review
7
Literature Review
Haque et al (1998) examined whether the introduction of automated trading along with the
changes in regulatory measures changed the risk return composition and thus improved the
market efficiency of the DSE. They conclude that the DSE at best can be considered as weak
form efficient and the automation & other regulatory measures have done little or nothing at all
to change the risk return composition of the market.
Mobarek and Keasey (2000) concluded that DSE does not follow random walk model and there
are significant autocorrelation at different lag causes of DSE in that their forms are not weak in
efficiency.
Haque et al., (2001) described the experience of DSE after the scam of November 1996 by
applying capital Asset pricing model (CAPM) and efficient market hypothesis (EMH).
Islam and Khaled (2005) analyzed on the predictability of the share price in DSE prior to the
boom in 1996 and found evidence in favor of short-term predictability of share prices.
Mobarek and Mollah (2005) suggested that there are some factors (beta, size, the ratio of priceto-book value, volume of shares traded, earnings yield, cash flow yield, dividend yield and
leverage) that influence share returns on the DSE.
Akhter and Quddus (1996) reveal that initial subscriber obtain the same return whenever they
dispose of their shares in Initial Public Offerings (IPOs) in a short period of about five or six
months. They used mean adjusted performance index to analyze price behavior of unseasoned
new issues from the point of view of initial subscribers who are interested only in short-run.
They found that the standardized mean excess return were virtually the same in first 30 trading
days and concluding 30 trading days of the first 100 trading days since debut.
8
Chapter Three
Research Method
9
3.1. Design of Research:

In this study data was collected and information were tabulated, processed and analyzed
crucially in order to make the paper fruitful, informative and purposeful. The report has been
prepared on the basis of the experience gained during the period of the internship. To prepare the
report of internship, I have collected all kinds of related data from the primary and secondary
sources.
Mainly I used two types of data in preparing this report.
Primary data
Secondary data
Primary data:
This report has basically prepared based on secondary data but I have included few things from
my experience as I have been working in this sector. Following method are used to collect
primary data.
Direct Involvement:
I have tried to collect the data and issues who is directly involve with this sector Specially DSE
persons & DSE officers and some inventors who invest money in Dhaka stock Exchange
Personal interview:
1. The primary data were collected through face-to-face interview with the DSE officials.
2.
The primary data were collected through participation and discussion during the trading
session.
3. I had also collected information through interview with the DSE members.
4.
I had collected information through interview by the questionnaire with the investors by
visiting various brokerage firms.
Observation Method:
I personally went to the all concerned authorities who are involved with this.
10
Secondary data:
Basically the report is furnished based on Secondary data as trading system of DSE can be found
only based on secondary data. There is very less authentic source to be traced of trading system
of DSE as this is not related with any public source. All sourced from published or processed
materials. I have collected secondary data from the following sources.
1. Various types of officials sources.
2. Various publications of Dhaka stock exchange.
3. Trade journals.
4. Research reports connected with the stock exchange.
5. DSE website and some others sources.
Design can extend experience or ad strength to what is already known through previous research.
3.3 Instrumentation
Office -2007 (Word & Excel)
11
3.4 Data Analysis

MARKETS
Table: 3.1
Public Market: In this market instruments are traded in nominal volume. Only trading of
market lot share is done here through automatic matching.
Spot Market: Instruments are traded in nominal volumes under corporate action if any.
Spot transactions are done here through automatic matching which must be settled within
24 hours.
Odd lot Market: Odd lots of all Instruments are trade in this market. Odd lot scripts are
traded here based on pick and fill basis.
.Block Market: Instruments are traded in bulk volume. It is a place where bulk quantities
of shares are traded through pick and fill basis.
12
CLASSIFICATION OF CATAGORIES
Criteria of the share Category:
A Category Companies: Companies which are regular in holding the Annual General Meetings
(AGM) and have declared dividend at the rate of 10 percent or more in a calendar year. (Mutual
fund, debentures and bonds are being traded in this category).
B Category Companies: Companies which are regular in holding the AGM but have failed to
declare dividend at least at the rate of 10 percent in a calendar year.
N Category Companies: All newly listed companies except Greenfield companies will be
placed in this category and their settlement system would be like B-Category companies.
Z Category Companies: Companies which have failed to hold the AGM or failed to declare any
dividend or which are not in operation continuously for more than six months or whose
cumulated loss after adjustment of revenue reserve, if any is negative and exceeded its paid up
capital.
INDEX OF DSE
There are three indices in the DSE as follows:
Table 3.2: Index of DSE
Sl.No
Index Name
Base Index
DSI (all shares)
350 (as on 01-11-1993)
DGEN
(A, B, G & N)
817.63704 (as on 24-11-2001)
Remarks
SEC directive regarding index
was on 17-11-2001
3
DS20
1000 (as on 01-01-2001)
Source: Compiled from different issues of monthly review, Dhaka Stock Exchange.
The all Share Price Index (DSI) comprises all listed securities of the exchange which has been
calculated since November 01, 1993 calculated on the basis of price movement of individual stocks
using IFC method. Earlier a price average index was in practice which was not perfect.
13
14
Table: 3.3 DSE Performance: Jan 2014 to Dec 2014
DSE Performance: Jan 2014 to Dec 2014
DSE Turnover
Index
Ratio of
Month
Value
Volume
Tk. in mn
Nos. mn
Turnover to
Market Cap.
DSEX
DSE 30
DSES
Jan-14
125,263.03 2,844.29
0.04 4,753.17 1,660.36
974.27
Feb-14
109,616.29 2,227.32
0.04 4,749.87 1,693.91
1,002.41
Mar-14
73,018.71 1,302.24
0.03 4,491.98 1,603.53
975.96
Apr-14
97,977.61 1,762.14
0.03 4,566.86 1,671.93
1,018.20
May-14
58,457.67 1,357.16
0.02 4,430.48 1,609.27
992.82
Jun-14
77,349.71 1,678.03
0.03 4,480.52 1,644.75
1,019.34
Jul-14
41,156.83 1,045.80
0.01 4,427.16 1,626.52
1,004.66
Aug-14
126,589.06 2,856.20
0.04 4,549.52 1,713.83
1,057.37
Sep-14
175,809.67 3,894.85
0.05 5,074.31 1,960.87
1,195.53
Oct-14
127,656.08 2,955.57
0.04 5,173.23 1,949.48
1,220.04
Nov-14
115,494.28 2,534.75
0.04 4,769.43 1,760.06
1,106.77
15
Dec-14
60,132.60 1,537.81
0.02 4,864.96 1,803.06
1,150.22
Figure: 3.1 Index movements for the year 2014

6,000.00
5,000.00
4,000.00
DSEX
3,000.00
DSE 30
2,000.00
DSES
1,000.00
0.00
42049
42108
42169
42230
42291
42352
42018
42077
42138
42199
42261
42322
Comment: The above table and graph shows the movement of price from Jan14, 2014 to Dec14, 2014. In this year the highest and lowest, DSEX-5,173.23 & 4,427.16, DSE-30-1,960.87 &
1,603.53, DSES- 1,220.04 & 974.27 respectively. We can see from the above graph that the price
of the DSI Index has an increasing trend.
Table: 3.4 DSE Performances: January to December 2013
DSE Performance: January to December 2013
Month
DSE Turnover
Ratio of
Value
Volume
Turnover
to
Tk. in mn
Nos. mn
Market
Index
DSEX
DSE 30
Cap.
16
Jan-13
38,957.
79
1,191.23
0.0
2
4,136.3
1
1,488.56
Feb13
72,116.
95
1,782.15
0.0
3
3,973.2
8
1,431.90
Mar13
33,305.
70
832.06
0.0
2
3,590.0
5
1,340.15
Apr13
32,264.
20
1,041.00
0.0
2
3,438.9
0
1,282.59
May13
60,015.
87
1,825.01
0.0
3
3,878.0
7
1,426.75
Jun-13
132,366.
22
3,170.10
0.0
5
4,104.6
5
1,532.55
Jul-13
153,046.
47
2,764.56
0.0
6
3,940.8
1
1,483.07
Aug13
71,455.
36
1,297.26
0.0
3
4,127.4
8
1,540.02
Sep13
103,344.
28
2,194.90
0.0
4
3,937.6
8
1,440.53
Oct13
47,215.
28
1,334.68
0.0
4
3,967.7
3
1,408.15
Nov13
109,185.
68
3,094.41
0.0
4
4,230.7
3
1,503.78
Dec13
99,468.
29
2,461.16
0.0
4,266.5
1,466.25
17
5,000.00
4,000.00
3,000.00
DSEX
2,000.00
DSE 30
1,000.00
0.00
42049
42108
42169
42230
42291
42352
42018
42077
42138
42199
42261
42322
Comment: The above table and graph shows the movement of price from Jan 13, 2013 to Dec13, 2013. In this year the highest and lowest, DSEX- 4,266.55 & 3,438.90, DSE-301,532.55 & 1,282.59 respectively. We can see from the above graph that the price of the DSI
Index has an increasing trend.
18
Table: 3.5 Monthly Performance for one year (DSE Performance - December 2012)
DSE Performance: January to December, 2012
DSE Turnover
Month
Value
Volume
Tk in mn
Nos. mn
Index
Ratio of
Turnover to
MCap.
DSI
DGEN
DSE 20
Jan-12
88,770.51
1,784.57
0.04
3,488.99
4,153.96
3,299.90
Feb-12
57,243.72
1,379.71
0.02
3,927.03
4,695.41
3,713.93
Mar-12
84,123.09
1,754.04
0.03
4,172.95
4,990.32
3,777.20
Apr-12
176,602.65
2,944.81
0.07
4,280.14
5,098.90
3,878.27
May-12
66,918.19
1,269.54
0.03
4,007.33
4,734.33
3,643.97
Jun-12
39,363.75
841.50
0.02
3,877.64
4,572.88
3,529.30
Jul-12
40,564.11
934.26
0.02
3,518.62
4,159.17
3,296.42
Aug-12
57,276.61
1,290.43
0.02
3,761.89
4,446.87
3,471.76
Sep-12
187,615.11
4,167.25
0.07
3,845.69
4,544.41
3,501.60
Oct-12
106,495.29
2,681.87
0.04
3,798.98
4,493.92
3,506.74
Nov-12
55,380.71
1,497.07
0.02
3,560.10
4,210.58
3,416.16
19
Dec-12
40,731.12
1,143.63
0.02
3,577.21
4,219.31
3,472.56
6,000.00
5,000.00
4,000.00
DSI
3,000.00
DGEN
2,000.00
DSE 20
1,000.00
0.00
42049
42108
42169
42230
42291
42352
42018
42077
42138
42199
42261
42322
Comment: The above table and graph shows the movement of price from Jan01, 2012 to Dec01, 2012. In this year the highest and lowest, DSI-4,280.14 & 3,488.99, DGEN- 5,098.90 &
4,153.96, DSE 20- 3,878.27 & 3,296.42 respectively. We can see from the above graph that the
price of the DSI Index has an increasing trend.
20
DSE Performance: January 2011 to December 2011
DSE Turnover
Month
Value
Volume
Tk in mn
Nos. mn
Index
Ratio of
Turnover to
Market Cap.
DSI
DGEN
DSE 20
Jan-11
186,969.24
1,442.65
0.06
6,198.82
7,484.23
4,701.74
Feb-11
114,887.12
1,020.38
0.05
4,317.89
5,203.08
3,514.51
Mar-11
217,125.14
1,967.89
0.08
5,275.13
6,352.10
3,968.38
Apr-11
156,284.38
1,375.91
0.06
5,032.95
6,050.85
3,826.22
May-11
92,211.28
1,035.36
0.03
4,798.37
5,758.26
3,795.86
Jun-11
134,650.48
1,519.33
0.06
5,093.19
6,117.23
4,069.10
Jul-11
298,172.99
3,446.75
0.10
5,380.10
6,459.62
4,264.63
Aug-11
88,648.65
1,103.55
0.04
5,195.68
6,212.00
4,190.47
Sep-11
70,572.48
819.43
0.02
4,944.96
5,910.20
4,080.05
Oct-11
69,990.40
929.94
0.04
4,205.07
5,036.50
3,749.96
Nov-11
69,514.86
1,026.09
0.03
4,403.37
5,268.55
3,894.68
21
Dec-11
61,529.82
1,279.87
0.02
4,383.94
5,257.61
3,910.33
8,000.00
7,000.00
6,000.00
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00
0.00
DSI
DGEN
DSE 20
DSE Performance: January 2010 to December 2010
DSE Turnover
Index
Ratio of
Month
Value Tk. in
mn
Volume
Nos. mn
Turnover to
MCap
DSI
DGEN
DSE 20
22
Jan-10
262,869.41
1,020.70
0.12
4,422.81
5,367.11
3,030.19
Feb-10
249,982.12
953.64
0.12
4,549.60
5,560.56
2,992.93
Mar-10
175,115.99
747.99
0.08
4,573.81
5,582.33
2,952.01
Apr-10
191,303.18
700.63
0.08
4,641.54
5,654.88
3,039.17
May-10
386,238.36
1,013.99
0.08
5,030.05
6,107.81
3,432.23
Jun-10
387,733.65
1,203.94
0.14
5,111.63
6,153.68
3,650.04
Jul-10
322,769.28
1,163.22
0.11
5,278.89
6,342.76
3,721.78
Aug-10
394,438.07
1,793.43
0.13
5,555.49
6,657.97
3,874.50
Sep-10
312,562.35
1,602.83
0.10
5,930.90
7,097.38
4,137.93
Oct-10
468,008.97
2,265.35
0.14
6,612.14
7,957.12
4,533.18
Nov-10
471,717.20
2,233.33
0.13
7,135.16
8,602.44
5,119.13
Dec-10
387,174.09
2,275.47
0.11
6,877.66
8,290.41
5,204.98
23
25,000.00
20,000.00
15,000.00
DSE 20
10,000.00
DGEN
DSI
5,000.00
0.00
42049
42108
42169
42230
42291
42352
42018
42077
42138
42199
42261
42322
24
Major index return on DSE

Figure: 3.6 Major index returns on DSE
The Bangladesh Stock Market (DSE General) increased to 4943.73 Index points in
December from 4769.43 Index points in November of 2014. Stock Market in
Bangladesh averaged 1908.63 Index points from 1990 until 2014
The Bangladesh Stock Exchange All Share Price Index tracks the performance of all
companies listed on the Dhaka Stock Exchange. Bangladesh Stock Market (DSE
General) - actual values, historical data, forecast, chart, statistics, economic
calendar and news. Content for - Bangladesh Stock Market (DSE General) - was last
refreshed on Tuesday, December 16, 2014.
25
IPO OFFERING IN DIFFERENT YEAR

An initial public offering (IPO) referred to simply as an "offering" or "flotation," is when a
company (called the issuer) issues common stock or shares to the public for the first time. They
are often issued by smaller, younger companies seeking capital to expand, but can also be done
by huge privately-owned companies looking to become publicly traded.
Figure: 3.7 IPO OFFERING IN DIFFERENT YEAR
No of Companies
No of Companies
18
18
14
14
13
11
10
12
17
17
2013
2014
14
3
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
From the above the graph, it can be seen that in year 2004, the number of companies that had
offered IPO was only 3 but in the following year it stood at 18. From year 2005 to 2014, the
number of IPO offering companies ranges from 10 to 18. The highest IPO offering is 18 in year
2005 &2009 and lowest IPO offering is 3 in year 2004.
26
Comparison of IPO and Listing

Table 3.8: Comparison of IPO and Listing
Year
2009-10
2010-11
2011-12
2012-13
2013-14
Listing
15
15
18
23
25
IPO
14
16
17
21
22
Figure: 3.8
Comparison of IPO and Listing

30
25
Listing
20
IPO
15
10
5
0
2009-10
2010-11
2011-12
2012-13
2013-14
In year 2009-10, the listing of the companies at DSE was 15 and the IPO offering by the
companies is 16. The highest number of listing of companies in DSE was in the year
2013-2014 which is 25. On that year, the IPO offering was 14. On the other hand, the
highest number of IPO offering by the companies was 22 in year 2013-2014
27
NUMBER OF ENLISTED SECURITIES

Table 3.9: Category wise total securities up to June 30, 2013
Catagories
Number of Securities
Companies
Corporate bonds
Trasuary bonds
Mutual funds
Debenture
Total
251
03
221
42
08
525
Figure: 3.9
Category wise total securities up to June 30, 2013

Companies
Corporate bonds
Mutual funds
Debenture
Trasuary bonds
8% 2%
48%
42%
1%
Among all the securities, the number of listed companies has stood at 251 up to June 30, 2013
where it was 319 in the end of 2013, a total of 68 companies securities have been sent to OTC
Market. So the securities of those 68 companies has also been sent to OTC market in those are
excluded here.
Figure: 3.10 Showing the Listed Securities of DSE (2001-08)
28
Listed Secrities
Listed Secrities
415
2009
445
2010
490
2011
515
529
552
2012
2013
2014
Scenario of Trade of securities in 2012- 2013

In 2013-13, the Volume of trade of listed securities increased sharply at the Dhaka Stock
Exchange. In 2012-13, a total of 2155 crore and 61 lakh securities were traded on Dhaka Stock
Exchange, The value of which stands at tk. 85 thousand 708 crore and 97 lakh. On the other
hand, 1857 crore and 97 lakh securities were traded in 2011-2012, the value of which is tk.
117145 crore and 14 lakh. The number of trading days was 235 days in 32012-13, which was
238 daysin 2011-12. The average number of securities traded was 9.17 crore in 2012-13 and
average transaction was tk. 364.72 crore. On the other hand, 7.8 crore securities waswere traded
in 2011-12 and average transaction was tk. 492 crore 20 lakh.
29
PERFORMANCE OF LISTED SECURITIES

Performance of Listed Securities from year 2004 to 2009 is given bellow
Table: 3.10
Year
Listed Securities
Cash Dividend
AGM Held
2009-10
445
117
234
2010-11
490
95
211
2011-12
515
105
226
20123-13
529
123
139
2013-14
552
139
265
Figure: 3.11
PERFORMANCE OF LISTED SECURITIES

Listed Securities
234
AGM Held
552
529
515
490
445
Cash Dividend
265
239
226
211
117
95
105
123
139
2009-10
2010-11
2011-12
2012-13
2013-14
In 2009-10, the listed securities were 445 and it was increasing every year & 2013-14 was being
552. On the hand cash dividend was being up and down every year. In 2010-10 it was very
down, only 95 cash dividend & 2013-14 was very high & it was 139. But not more increasing
AGM held against increasing no. of listed securities. In 2013-14 no. of AGM held was 265.
30
MARKET CAPITALIZATION
Market Capitalization is one of the indicators of market performance. It is the total market value, at
the current stock exchange list price of the total number of equity shares issued by a company.
Market Capitalization =
Year
(No. of Issued Share * Close Price)
Table 3.11: Market Capitalization

.
Amount in TK. MM
% of annual Growth
2009
1903228.05
2010
3508005.80
84.32
2011
2616730.54
-25.41
2012
2403555.62
-8.14
2013
2647790.83
10.16
Growth rate of market capitalization from 2009 to 2013 is shown below by a line chart:
Figure: 3.12
\
MARKET CAPITALIZATION
100
80
60
% of Annual Growth
40
20
0
2009
-20
2010
2011
2012
2013
-40
Growth pattern of market capitalization has shown in this chart. During 2009 & 2010, DSE
market capitalization has increased from the previous year. But market capitalization has
exceptionally increased in 2010, amount was Tk. 3508005.80 million and growth was 84.32%
but in 2011 it decreased by a huge amount. Growth rate decreased to 25.41% from 84.32%. It is
also reflected from the table that market capitalization of different year has fluctuate at a larger
percentage.
31
Total Turnover in Volume

Volume of the share traded as a percentage of total share listed on an exchange during a period,
usually either a day or year. The same ratio is applied to individual securities and the portfolios
of individual or institutional investors.
Table: 3.12
Year
Total Turnover in Volume

Growth
(mn)
2008
4605.38
2009
7973
73.13
2010
16975
112.90
2011
16967
-0.04
2012
21689
27.83
2013
22989
5.99
Growth rate of Total turnover in volume from 2004 to 2010 is shown below by a line chart
Figure: 3.13
Total Turnover Volume

120
100
80
Growth
60
40
20
0
2008
-20
2009
2010
2011
2012
2013
This chart shows the total turnover in volume in DSE. From this table it is reflected that total Turnover in
volume has increased 2009 from the previous year the amount was 7973mn from 4605.38mn. The
growth rate of turnover in volume of DSE has increased to 73.13% in 2009 and the value decreased in
2011. Again the value has exceptionally increased in 2012, amount was Tk. 21689 million and growth
was 27.83 %. The total turnover in volume was highest in 2010 and the value was 16975mn and growth
rate was 112.90% and lowest in -0.04% in 2011. The average growth rate of total turnover in volume of
DSE is 73.15%.
32
Total Turnover in Value

The total value of stock sold in a year divided by the average value of goods held in stock. This
checks that cash is not tied up in stock for too long, losing its value over time.
Table 3.13: Total Turnover in Value
Year
Total Turnover in Value (mn)
Growth
2008
667964
2009
1475301
120.87
2010
4009913
171.80
2011
1560912.09
-61.07
2012
1001084.90
-35.87
2013
952742.08
-4.43
Growth rate of Total turnover in value from 2008 to 2014 is shown below:
Figure: 3.14
Total Turnover in Value

200
150
100
Growth
50
0
2008
-50
2009
2010
2011
2012
2013
-100
This chart shows the total turnover in value in DSE. From this table it is reflected that total Turnover in
volume has increased 2009 from the previous year the amount of value was 1475301mm from
1475301mn. The growth rate of turnover in volume of DSE has increased to 171.80% in 2010 and the
value decreasing start form in 2011. The average growth rate of total turnover in volume of DSE is
73.15%.
33
Sector-wise Turnover performance in 2012-13

Figure: 3.15
Sector-wise Turnover performance in 2012-13

Telecommunication; 1%
Corporate Bond; 0%
Insurance;
3% 2%
Miscellaneous;
Travel & Leisure; 11%
Ceramic; 1%
Banks; 19%
Tannery; 0%
IT- Sector; 2%
Financial Institutions; 6%
Cement; 2%
Service & Realestate; 1%
Mutual Funds; 16%

Paper & Printing ; 0%
Pharmaceuticals & Chemicals; 6%
Jute; 0% Fuel & Power; 8% Food & Allied Product; 2% Engineering; 4%
Textile; 16%
An analysis of the sector of transaction in fiscal 2012-13 shows that the fuel & power sector has
retained its top position accounting for 15.89 % of total transaction against 22.45 % of the
banking sector in the previous year. Other performs in financial 2012-13 are textile 13.31%, bank
11.37% travel & leisure 9.15% pharmaceuticals 8.29%, engineering 7.50%, NBFI 5.54%,
Telecommunication 5.48%, mutual fund 5.16%, insurance 4.81%, cement 3.71%, and
miscellaneous 3.02%.
34
Types of Trading System of DSE:

Cry-Out System
Automated Trading System
Internet Trading System
Cry-Out System
Before starting on-line trading system, at the Dhaka Stock Exchange, trading was conducted
through Cry-out system. Under this system, Members and their Authorized of the Stock
Exchange who have license to trade from the Securities & Exchange Commissions would come
to the Stock Exchange Floor and participate in trading. But there were a number of shortcomings
of this trading system.
Difficulties of Cry-Out System

The following difficulties were found in the cry-out system
Cry-out floor trading was inept and slows down the process of finalizing deals on the
stock exchange floor between the stock dealers.
There was a common complaint from the investors that, they didn't get fair price. They
didn't know what actually happened on the floor. They had to depend on the broker and it
was the market for the brokers not for the investors. To get rid of this problem, a new
system is required to be developed.
Manual Clearing and settlement system is clumsy and slow causing an affliction in stock
exchange settlement department and ultimately limiting the trade volume and
transactions.
Participation in the Stock Market remains restricted within a community residing close to
the Stock Exchange building. The business can't be reached out the common mass.
Cry-out system was a noisy manual system; the open floor action was not only messy and
tiring for the traders, but also difficult for the Stock Exchange to monitor the transactions
as required by the rules and regulations.
The manual system was error-phone. Errors were very difficult to detect in the current
system.
To get rid of these difficulties, it was very essential at that time to start on-line trading i.e. Screen
based trading system. On-line trading is automated by computer application.
35
Automated Trading System
Figure: 3.16 Trading System of DSE

PREAMBLE
Globally the developments in information & communication technologies (ICT) have created a
new instance in the securities market operations. Stock Exchanges all over the world have
realized the potentiality of ICT and inclined to the electronic trading systems. It was understood
by DSE that technology would ensure transparency, timeliness and satisfaction in customer
service. Considering those DSE introduced Automated Trading System on 10th August 1998.In
other words, the trading floor moved right into the member's office premises where an investor
started to place buy/ sell orders.
DSE meet the potential growth of the trades and prospective investors, DSE has taken initiatives
to upgrade its current Trading Application MSA to MSA-Plus (Upgraded TESA Client part),
which was started on 10th June 2012.
DSE Trading System, Hardware Infrastructure:

DSE Automated Trading System (HP Nonstop S7804) is running on fault tolerant, high available,
scalable and maintainable Mainframe Server. Previously DSE established the TANDEM Nonstop
K204 System on September 1998 and on August 2005 it was replaced with highly scalable HP
Nonstop S7802. DSE upgraded the Trading System again on 21st December 2008. The existing
HP Nonstop S7804 Server is highly fault tolerant to the fact that no single component failure will
36
halt the system. Its constituent parts are hot swappable and upward compatible; components can
be added or removed while the system is running and any compatible new upgraded will work
with the system.
All disk drives are mirrored so, if any of the disk crashes the exact copy of the data is available
at online. Moreover the connecting path for every disk whether it is primary or mirror is also
redundant. In every case, minimum two peripheral devices exist. All the components are working
active - active load balancing procedure. To ensure better power quality we have ensured high
end UPS's with long durable backup capability, two instant backup generations and other
electrical devices.
DSE Network Infrastructure

Secured, structured & distributed LAN & WAN setup has been established to connect
DSE TREC Holder Company Offices with the Central Server.
Fast Ethernet Backbone, Fiber Backbone, Radio link, DDN, Dialup connections are
established utilizing intelligent Switches, Access-Servers, Cisco Routers including
CISCO IPS & IDS security system.
Presently there are 229 Member House Server (MSA) (Primary connecting nodes)
connected to the central Network.
Around 4000 TWS are connected in the DSE Central Network through DSE LAN &
expanded LAN and WAN setup.
Presently DSE network POP at Dhanmondi is running smoothly to support Branches of
the Brokerage houses.
All network service providers (NSP) backbone connection and direct fiber connections
from DSE to Brokerage House were taken to underground through NTTNs (Fiber at
Home and Summit).
To smooth support of Branch connectivity of Brokerage houses, DSE implemented
hazard free single point solution for those connections through various vendors. Listed
Network service providers are not required to lay cable up to the Brokerage house, they
need to terminate the cable at DSE Setup for Branch support.
More than 250 Workstations (including IP based devices like printer, scanner,
photocopier etc) are supported by DSE official Network setup.
CISCO Based Routing and Switching devices, along with Firewall (Check point and
CISCO) are used for Network Infrastructure. Integrated Services Routers (CISCO 3900,
3800 and 2800 series router), Catalyst switches 2960 TCL & TTL, CISCO Firewall 5500,
Checkpoint Firewall Safe Office devices are used to develop Network Infrastructure for
DSE ICT Support.
37
Figure: 3.17 Basic Block Diagram of DSE Network
DSE Trading Software

Core System Software & Database
Trading Application, TESA
TESA Solution Benefits
Principal Functions of TESA
DSE Trading System Communication Architecture
Terminals, MSA Plus Terminals are as follows
MSA Plus Deployment Diagram
Core System Software & Database:
The system software is HP Proprietary Non-Stop Kernel and includes the database as part of the
operating system thereby eliminating the layer typically found in most Database Management
Systems (DBMS). The existing database NONSTOP SQL is a distributed relational database
management system that uses the ANSI-standard Structured Query Language (SQL) to describe
and manipulate data. The Database is simply a different operational session for the operating
system. The proprietary nature of the system software arguably enhances system security.
38
HP system has its own Pathway built-in.

HP Pathway with Non-Stop TS/MP software provides application server functionality that allows
developing and deploying mission-critical online transaction processing (OLTP) applications on
HP integrity Non-Stop servers. Using this software, Developers can concentrate on implementing
business logic without being concerned with Common application services such as load
balancing, communications I/O, memory management, fault tolerance, and/or threading and
scheduling. In this way, Pathway with Non-Stop TS/MP supplies a high performance highly
available OLTP environment that is built-in rather than programmed it.
Trading Application, TESA
DSE has used TESA, The Electronic Securities Architecture, and application software as
Trading Application. TESA software is built for the global securities markets. It uses fault
tolerant computers, intelligent workstations and client/server design techniques. This provides
cooperative processing, high message integrity, continuous operation and fully automatic
recovery. This co-operative mechanism enables very high speed processing which is essential for
today's electronic markets.
TESA's Application Programmatic Interface (API) is the gateway to the TESA system from the
outside world. All external devices connect through the API. The API provides the translation
between external devices and internal processes. This means that a new process does not need to
be written to support each new device, only the API needs to be modified.
TESA was developed considering distributed Database concept using MS-SQL Database in MSA
Plus replicating with HP Non Stop SQL of Trading Engine for intra-day information. MSA Plus
is a Web Based Server Application running on the Member Server. Different Terminals use this
client application, MSA Plus, using Web browser as a GUI (Graphical User Interface).
Administrators, Traders, I Traders and Investors are performing trading activities using
corresponding terminals.
TESA Solution Benefits
The TESA application suite derives significant advantages from being implemented on the HP
Non Stop platform. The HP Non Stop customers have benefited from these advantages.
Fault Tolerance: One of the most important automation requirements for any stock
exchange system is continuous system availability. With most systems Fault Tolerance is
created at the application level. Fault Tolerance is a fundamental design feature of the HP
Non Stop architecture.
Data Integrity: Data integrity is an integral feature of HP architecture. TESA employs
standard HP tools to achieve exceptional data integrity.
39
Scalability: The ability of an exchange to accommodate extraordinary increases in

transaction volumes without loss of its Capital investment in automation is very
important. The HP Non Stop Server is massively scalable due to Parallel processors.
Principal Functions of TESA
Market Information: Supplying all market information needed to formulate the buy and
sell decisions.
Order Management: Accept, validate and store orders and quotes from broker
workstations and / or systems.
Order Execution: Automatically executes orders when buy and sell prices match.
Trade Reporting: Trade execution reports are provided to each trade participant, to the
settlement system and / or the depository and to the market.
Index Calculation: Calculates and publishes market indices (DSE General Index &
Weighted Average Index.
Market Access: Provide exchange TREC Holder Companies with efficient affordable
GUI-based tools for accessing the market.
DSE Trading System Communication Architecture:
Figure: 3.18 DSE Trading System Communication Architecture

40
Terminals, MSA Plus Terminals are as follows:

Various Terminals are used for Administration, Trading and Market View purpose.
Broker Terminal: Broker terminal is the gateway between the Users (Trader, Dealer,
Investor and I Trader) and the Exchange. It needs to establish connection with trading
system so that the Users can logon to the trading engine.
Admin Terminal: Administrative functions within the Broker are carried out from the
Admin Terminal like Client Registration, Trader Control, set buy Cash or sell Share
Limit, investor registration, Logoff, Logon or Suspend etc. Broker can create ten Admin
terminals to perform specified roles.
Trader Terminal: Traders are users who trade on behalf of client or investors. Traders
connect to the MSA Plus and then Login remotely to the Trading Engine to perform
Order submits, modifies, withdraw, delete etc.
Dealer Terminal: All Dealer activities are performed here as like Trader Terminal.
Investor Terminal: Clients/Investors are allowed to place local orders through Internet (as
per Client/Investor registration on Brokerage House). Investor can view Market
information in Investor Terminal. A special purpose terminal, named I Trader, submits
Investors Local order to the main Trade Engine.
I Trader Terminal: I Trader user manage Investor orders; it is special purpose terminal to
handle only the Investors Orders that are submitted through Internet. I Trader cannot
perform general trading on behalf of Clients.
View Terminal (non trade terminal): View Terminal users can locally login into MSA Plus
application and access the information available locally. This Terminal can be used to
view the Market (like Public Market), Market Depth, Market ticker, News, Index etc. Ten
View Terminals can be created by an individual Broker.
41
MSA Plus Deployment Diagram
Figure: 3.19 MSA Plus Deployment Diagram

Trading sessions
TESA conducts trading in-5-phases.
Enquiry: In this session Brokers can logon to the system. No order will be submitted in
this session. No trade will be executed. Only previous orders can be withdrawn in this
session.
Opening: The Opening is a pure, single-price auction. All buy and all sell orders are
compared and calculate the open-adjust price. No trades will be executed in this session.
42
Continuous trading: During this phase, participants enter orders and immediate
execution or for inclusion in the book. Automatic matching and execution takes place
based on best price/ first in, first out trading rules.
Closing: Closing prices are calculated and disseminated to market participants.
Enquiry: Market will be closed in this session & other facilities like the previous enquiry
session.
Internet Trading System:

Internet Trading System (ITS) is DSE venture on behalf of the brokers. This site has been
provided by the Dhaka stock exchange so as to give customers the convenience to trade or put
orders on DSE from anywhere in the world irrespective of the trading hours of the stock
exchange. The trading is done by registering on the site under some existing broker of the stock
exchange.
Steps for trading through Internet:
Register on the site as an investor. It is necessary to register under some existing broker/sub
broker in the Dhaka stock exchange. For additional security there are two passwords, browsing
password, which is reduced every time, a transaction like order entry, modification etc. is made.
Trading can begin only after the respective broker has approved the registration and assigned
limits for trading. The investor can do trading during the trading hours of DSE as well as put
offline orders during the non-trading hours, which get added into the system in the next trading
session.
The investor can trade only unto the limit assigned to him by his broker. On exceeding this limit
the investor gets suspended.
Procedures:
Agreement with a broker: As an individual investor you need to upon on accent with a broker.
When you are willing to use Internet Trading facilities, you will need to fill in a special ITS
account opening form. The terms and conditions to be followed by you and your broker for ITS,
will be little different from the regular trading account. All brokers are not eligible for ITS.
Please see in the relevant section of this website or e-mail to us for a list of brokers who can offer
you ITS.
Although the form is available on the net, you still need to fill in and submit to the chosen broker
a hard copy of the form duly filled in.
43
Additional trading system of DSE:

Odd lot trading mechanism
Auction session trading
Sport order trading
Bulk order trading
Big lot order trading
OVER THE COUNTER (OTC) MARKET

Dhaka Stock Exchange (DSE) has introduced the Over the Counter Trading (OTC) market on
September 6, 2009 to segregate companies with weak fundamentals from its main trading frame.
'Over the Counter' refers to stocks that trade via a dealer network as opposed to on a centralized
exchange. It also refers to debt securities and other financial instruments such as derivatives,
which are traded through a dealer network. Instruments such as bonds do not trade on a formal
exchange and are, therefore, also considered OTC securities. At the initial stage, 51 (present-68)
companies have listed with OTC market.
In general, the reason for which a stock is traded over-the-counter is usually because the
company is small, making it unable to meet exchange listing requirements. Also known as
'unlisted stock', these securities are traded by broker-dealers who negotiate directly with one
another over computer networks and by phone. The OTC at Dhaka is a separate trading floor for
the buyers and sellers of the companies that are removed from main board for some valid
reasons. According to DSE, the reasons may include non-performance and/or weak performance
of the companies and noncompliance of listing rules. Most of the Z-category companies are
shifted to the OTC market. Z-category, a section in the DSE main trading frame, includes over
90 listed companies with weak performance.
44
3.6 Limitations of the study
It is true that most in the time doing some study on a subject or plan to research on a subject,
every material of study would not be available all the time .I might face some problems or there
must be some limitations. At the beginning stage of my study I have had some problem, like I did
not get all relevant information. Sometimes I got information but later it turned into uncompleted
or old information.
Another significant limitation of the study was time restriction. Even though I have given our full
effort to make this report a good one, but it is too tough to perform well such an analysis within a
shorter period of time. Though I have faced some other problems such as-unavailability of some
information, technical problems which includes computer problem, virus problems, software
problems, I also had problems regarding some brochures, file, information paper. But I did not
give it up. I continued my quest. And I was able to get over the problems and limitations.
Despite my sincerest endeavor, the study suffers from some limitations due to various reasons,
such as:
Due to short time, I could not collect enough necessary data about the study to prepare
the report.
Some of key peoples of DSE were very much busy with their duties that they could
seldom manage time to answer the questions.
Investors are not fluently giving opinion due to some restriction.
Researcher could not find sufficient data because of DSE great secrecy.
Though the above limitations, I had tried with all of my efforts to know and find out the response
pattern of the subjects and consultation of relevant record and document. Data have reached a
fairly acceptable degree of accuracy.
45
3.7 Summary
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. Financial market include primary markets,
floating initial public offering and secondary market were existing security of listed companies
are being traded
DSE is a nonprofit making organization. I am incorporated on 1954 as a limited co. by guarantee
on 1956; floor trading was made with open cry- out auction system. DSE is a completely
automated exchange with screen based trading facility on countrywide communication network.
The automated trading system of Dhaka Stock Exchange has removed all the limitations of the
traditional Cry-Out system. After launching the automatic trading system, Dhaka Stock
Exchanges major problem has almost been solved. At present, there are no such major problems
as was available during the Cry-out system
Two types of Stock market, first one is primary market and second one is secondary market.
Primary market issued shares first time, then the shares coming secondary market. Both primary
and secondary market is dependable to one another. In primary market shares are issued by IPO
to the public. In secondary market the shares, which are issued in the primary market, are traded
through the brokers.
There are four types of secondary market such as first market, second market, third market and
forth market. There are five categories of companies are enlisted in CSAE. They are A, B, G, N
& Z categories. Five categories companies are traded by three systems such as
Call over trading system
Automated trading system
Internet trading system
46
Now trading has become automated, lead by DSE through central depository .The central
depository Bangladesh limited (CDBL) was create in august 2000 to operate and maintained
central depository system (CDS) of electronic book entry, recording & maintaining, securities
accounts and reregistering transfer of securities. The objectives of establishing CDBL is provide
CDS to at momentum to the growth and acceleration of our capital market. Under such
circumstances, the depository act 1999 enabled and motivated the companies in private sector
with join collaboration from the government to set up a security depository companies.
DSE practices a daily netting system for its settlement. Members receive a net off statement on
every trading day in the post closing session. Settlement system is the process in transferring
money & shares of executed trade of buying & selling broker in a stock exchange. IT is an
intermediary act as common agent. Stock exchange fixed the settlement period by which &
executed trade must be settled.
From the forgoing discussion it can be said present automated trading environment, bids /offers,
depth, required broker particulars are all recorded and can be retrieved for future reference.
A developed market economy is always accompanied by a robust stock market. Since
Bangladesh has adopted free market economy as her national policy to achieve her goals of
higher growth and rapid privatization, she must revive her stock markets and make them capable
of working as the main vehicle for mobilizing and allocating funds needed to finance the
industrial and other development activities of the country.
In fact, no alternative path is suitable like a stock market to strengthen the financial base of a
country, gear up its development activities and achieve its all-out economic emancipation. Dhaka
Stock Exchange has been eminently supportive in many ways in this journey of capital market
development in Bangladesh. In this brief span of its existence DSE has played a noteworthy role
in the development of capital market in Bangladesh. DSE contribution is enormous in shaping
where we stand now and success of DSE in this journey of development of capital market in
Bangladesh largely depends on how it run its Trading System.
47
Chapter Four
Research Findings
48
Research Findings
Stock market is part & parcel of capital market. Contribution of any stock exchange
generally leads to economic growth by increasing the funds to finance industry and
other enterprise. Stock Exchange is an autonomous body formed by
shareholders/members. It can take various decisions independently.
When I worked on this topic that time found some positive & negative impact. Many positive
and little bit negative results have found from which is presented below:
Positive impacts
Young investors are increasing in number
Number of brokerage house has been increased so fast
No. of securities company increasing every year.
Today, general index is also in increasing.
In 2011 market capitalization was fall but from2012 it again increasing every year.
Sector wise turnover is also increasing.
After launching the automatic trading system, Dhaka Stock Exchanges major problem
has almost been solved.
At present, there are no such major problems as was available during the Cry-out system
At present, all share price index are used at the Dhaka Stock Exchange
Dhaka stock exchange is functioning with very efficient, skilled and resourceful
personnel.
DSE practices a daily netting system for its settlement & Members receive a net off
statement on every trading day in the post closing session.
Introducing Central Depository System (CDS)
49
To make appropriate the methodology of index, selective index should be calculated

instead of all share price index
Market makers create both demand for & supply of securities and to the consistency in
the prices.
DSE can introduce automate monitoring systems that may control price manipulation,
malpractices and inside trading.
To make arrangement to set up merchant banks, investment banks and floatation of more
mutual funds particularly in the private sectors.
DSE can make sure all the listed companies publish their annual reports with actual and
proper information that can ensure the interest of the investors.
DSE automated trading platform TESA and MSA plus is modernized time to time.
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Negative Impacts
There are some problems of DSE have been found. These are:
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.
All the information about DSE is not available. Some information which may be
significant for the stakeholders like investors, researcher, students, public etc is not
disclosed publicly.
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.
Lack of proper market monitoring
Proper framework with strict rules and regulations that provides incentives and protection
to investors is absent in DSE
Insufficient technical Expert
Like any other industry, people who invest or are involved in capital market activities,
have not sufficient knowledge about the market and the product. Even, they dont know
how to make a valuation of a share. As a result, they have to suffer losses. What has
happened to the capital market in the recent past, have vividly demonstrated lack of
knowledge all around thus resulting negative impact in every respect.
Some stock exchange members also serve as director of listed companies. This can lead
to the chance of insider trading especially in such a poorly regulated market.
Lack of proper and adequate disclosures
Lack of enforcement with the compliance of rules and regulations
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Chapter Five
Conclusions and Suggestions for Future Research
52
5.1 Conclusions
A developed market economy is always accompanied by a robust stock market. Since
Bangladesh has adopted free market economy as her national policy to achieve her goals of
higher growth and rapid privatization, she must revive her stock markets and make them capable
of working as the main vehicle for mobilizing and allocating funds needed to finance the
industrial and other development activities of the country. In fact, no alternative path is suitable
like a stock market to strengthen the financial base of a country, gear up its development
activities and achieve its all-out economic emancipation. Dhaka Stock Exchange has been
eminently supportive in many ways in this journey of capital market development in Bangladesh.
In this brief span of its existence DSE has played a noteworthy role in the development of
capital market in Bangladesh. DSE contribution is enormous in shaping where we stand now and
success of DSE in this journey of development of capital market in Bangladesh largely depends
on how it run its Trading System.
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5.2 Discussion
The stock market is one kind of capital market where the stocks are of the different companies is
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.
Discussion about Types of stock market:

There are two types of stock markets such as
Primary market
Secondary market
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.
54
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.
Submit the form along with the subscription money to the selected bank.
Collect the bankers acknowledgement. \
Wait for lottery.
IPO distribution system

Situations
Over- subscribed
Distribution System
Lottery
Under- subscribed
Distributed to the public + under writers

(If subscribed by less than 50%, return
to the public)
Distribute as supply
Subscribed fully
Refund Warrant /Allotment of IPO:

If our 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 we 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.
55
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.
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.
56
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
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Current Trading issues of DSE

For smooth trading operation, DSE has installed modern server into the existing:
CDS (Central Depository System)
NGTS (Next Generation Trading System)
CDS (Central Depository System)

According to the Bank of International Settlements, A Depository defined as: A facility for
holding securities, which enables securities transactions to be processed by book entry. Physical
securities can be immobilized by the depository or securities may be dematerialized (so that they
exist only as electronic records).
Central Depository Bangladesh Limited (CDBL) was incorporated as a public limited company
to operate and maintain the Central Depository System (CDS) of Electronic Book Entry,
recording and maintaining securities accounts and registering transfer of securities, changing the
ownership without any physical movement or endorsement of certificates and execution of
transfer instrument, as well as various other investor services including facilitation of the
secondary market trading of Treasury Bills and Government Bonds issues by the Bangladesh
Bank.
The Register of Joint Stock Companies (RJC) issued the certificate of incorporation and
certification of business commencement to CDBL on 20 August 2000. The Authorized and Paidup-Capital as Tk 500 million and Tk 300 million respectively with the value of each share is
fixed at Tk. 01 million.
The objective of establishing CDBL is to provide CDS to add momentum to the growth and
acceleration of our capital market. Problems such as fake, forged or lost shares, long settlement
cycle, operational inefficiencies of manual clearing and settlement system, hassles of shares
registration, transfer and certificate validation are still prevailed in the market and due to them,
the investors felt disinclined to stake their money in such a volatile and shaky atmosphere. Under
such circumstances, the Depository Act 1999 enabled and motivated the companies in private
sector with joint collaboration from the government to set up a securities depository company.
CDBL mainly concerning on the following points:
BO account opening.
BO ISIN inquiring & maintenance
Dematerialization
Settlement
Transfer
Transmission
Dematerializes
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NGTS (Next Generation Trading System):

DSE is a forward-looking bourse of the country. Among the major steps and plans, DSE has
taken various initiatives to meet the present challenges. For smooth trading operation DSE is
now under process of introduce NGTS (Next Generation Trading System) into the existing
engine to facilitate Equity market.
59
5.3 Suggestions for future research

After launching the automatic trading system, Dhaka Stock Exchanges major problem has
almost been solved. At present, there are no such major problems as was available during the
Cry-out system. However, the following are the problems mentionable now faced by the Dhaka
Stock Exchange.
Physical transfer of Shares
The real problem lies with physical transfer of shares. It has earlier been mentioned that, after
automation, Dhaka, Sylhet are connected with Dhaka Stock Exchange and trading occurs at the
same time. As a result, shares and securities are required to be sent/to take delivery from that
region for settlement. Its really a cumbersome work. Because, at the time of sending security,
there attached a 178 form along with that security. The share/security is sent through courier
services. Thought there is an insurance policy against the risks of transfer of shares; nevertheless,
for avoiding risks, the clearing and Settlement department takes some actions. When they intend
to transfer share to any regional office, they separate the 117 form and securities into two parts
and putting them in two separate packets, they sent the same through two separate courier
services. Reversal, in case of receiving of shares/securities, the said department gets two packets
from courier services. One containing 117 forms and another containing shares. Then, they
adjunct the respective117 form with respective securities. This is surely a time consuming and
difficult job.
Index Calculating
At present, all share price index are used at the Dhaka Stock Exchange. But this is not a proper
methodology. By using this methodology of calculating index, appropriate value of index cant
be ascertained.
Insufficient technical Expert
Dhaka stock exchange is functioning with very efficient, skilled and resourceful personnel. As all
the systems are going on manually, hence, system department have to work much. In addition,
they have or render services to various Broker Workstations to solve the technical problems of
the BWS. As a result, more personnel are required for system department to reduce the burden of
work. But, they are not getting personnel as per their requirement.
Forward Buy/Sell
There are some members, who, in fulfilling clients demand, put order for forward
buying/selling. It means to buy share without having sufficient fund and to sell share without
60
having securities. This leads to that member firm towards squaring up and as a result, a complex
situation arises.
Lack of Knowledge
Like any other industry, people who invest or are involved in capital market activities, have not
sufficient knowledge about the market and the product. Even, they dont know how to make a
valuation of a share. As a result, they have to suffer losses. What has happened to the capital
market in the recent past, have vividly demonstrated lack of knowledge all around thus resulting
negative impact in every respect.
Manipulations & Scams
The environment around the capital market is full of rumors of scams and wrong dealings.
Brokers are accused of manipulating prices; companies are accused of miss-pricing their stocks,
of floating rumors and of misrepresentation of performance. It is impossible to determine the
validity of these accusations.
61
Reference
Webside:
www.dsebd.org
www.wikipedia.org
www.google.com
www.article.com
www.bdstock.com
www.stockbangladesh.com
Magazine & Journal paper:
Dhaka Stock Exchange Limited, Monthly magazine, (December 2014)

Annual report of Dhaka Stock Exchange Limited (20013-2014)
Books:
Hossain, M. F., Siddiquee, M. M., Rahman, M.I., (2006), Dividend Surprise and Market
Reaction Evidence from Dhaka Stock Exchange (DSE)
Rahman, S., Hossain, M. F., Weak-form Efficiency: Testimony of Dhaka Stock Exchange
Akhter, S., Misir, A., Ahmed, S., (2005), Capital Markets Development in Bangladesh:
the Status of Dhaka Stock Exchange
62

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Chapter One

Prepared By Md. Mahbub Alam

Background of the Problem :

Historical Background of the Dhaka Stock Exchange:

Prepared By Md. Mahbub Alam

Prepared By Md. Mahbub Alam

Function of Dhaka Stock Exchange

Listing of Companies.(As per Listing Regulations).

Mission of Dhaka Stock Exchange

Objectives of Dhaka Stock Exchange

To develop a strong platform for the entrepreneurs for raising capital.

Prepared By Md. Mahbub Alam

1.2 Statement of the Problem

1.3 Purpose of the study

To examine the trading system of DSE.

1.4 Importance of the study:

Prepared By Md. Mahbub Alam

1.5 Scope of the study

1.6 Definition of terms

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3.1. Design of Research:

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3.4 Data Analysis

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DSI (all shares)

350 (as on 01-11-1993)

817.63704 (as on 24-11-2001)

Prepared By Md. Mahbub Alam

Prepared By Md. Mahbub Alam

Table: 3.3 DSE Performance: Jan 2014 to Dec 2014

DSE Performance: Jan 2014 to Dec 2014

0.04 4,753.17 1,660.36

0.04 4,749.87 1,693.91

0.03 4,491.98 1,603.53

0.03 4,566.86 1,671.93

0.02 4,430.48 1,609.27

0.03 4,480.52 1,644.75

0.01 4,427.16 1,626.52

0.04 4,549.52 1,713.83

0.05 5,074.31 1,960.87

0.04 5,173.23 1,949.48

0.04 4,769.43 1,760.06

Prepared By Md. Mahbub Alam

0.02 4,864.96 1,803.06

Figure: 3.1 Index movements for the year 2014

Prepared By Md. Mahbub Alam

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Major index return on DSE

Prepared By Md. Mahbub Alam

IPO OFFERING IN DIFFERENT YEAR

Prepared By Md. Mahbub Alam