Final Project DS Exchange

8/7/2019 Final Project DS Exchange

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Stock Market:

A stock Market is place where stocks (shares) can be bought and sold. StockExchanges are traded the shares of quoted companies. In Bangladesh, we havetwo Stock Exchanges in Dhaka and Chittagong. The following type of instruments is traded at Dhaka Stock Exchange (DSE) and Chittagong StockExchange (CSE):

(a) Equity Shares (b) Debentures (c) Mutual Funds

The Dhaka Stock Exchange (DSE) has 195 SEC registered tradingmembers/brokers and the Chittagong Stock Exchange (CSE) has 124 registered

brokers. Many of these registered brokers have authorized representativesoperating on the floor on behalf of the concerned brokers of DSE or CSE. Oneshould execute their deal through a registered broker of a recognized stockexchange or through a registered authorized representative.

All investors should open a BO accounts with necessary documentary support of proof of identity and get the registration/account number. The feature of thisopening an account is to reduce the chances of any disputes.

Our Journey:

We went to DSE on 9th April. That was nice sunny day went their by Roadstat.When we went there we were stuck till 1 hour for the procession of Jakir Party(JPB). Then we got down from the bus and took part on that procession. Actuallythat was a very nice journey. At last after two our journey we reached in our destination.

Though we are in trouble we are very glad that we got the opportunity to visit theDSE. We thanked for this opportunity to our respected instructor TashfeenHussain for his encouragement to go DSE.

At first we met with the Chief Executive Officer SK .G. Kuddus of M. SecuritiesLtd. and we also met with Md. Delower Hossain the Programming Officer of DSE.Both of them were very cooperative and provide us various important informationabout DSE.

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We also met with the assistant receptionist Nurul Islam, library research officer

Hosna Ara Parvin and library publication officer Shafiqur Rahaman. All of themgave many information about DSE library, how it works and how it goes.

INTRODUCTION OF DSE

Incorporated as East Pakistan Stock Exchange Association Ltd. : 28th April1954

Start of Formal Trading : 1956

Renamed as East Pakistan Stock Exchange Ltd. : 23rd June 1962

Renamed as Dacca Stock Exchange Ltd. : 13th May 1964

Trading Suspended under new State Policy : 16th December 1971

Trading Resumed in Bangladesh : 16 August 1976

Starting Of All Share price Index calculation : 16th September 1986

Share price Indices calculation on basis of IFC Designed formula : 1stNovember 1993

Starting of Automated trading : 10th August 1998

Starting Of DSE-20 Index calculation : January 2001

Starting Of DSE General Index calculation : 27th November 2001

Start of CDS through CDBL : 24th January 2004

DSE at a Glance

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FUNCTIONS OF DSE

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 shareoutside 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 Regulations1999)

Announcement of Price sensitive or other information about listedcompanies through online.

TRADING DAY

The trading shall be open on all days except bank holidays as declared under theNegotiable Instruments Act, 1881 (XXVI of 1881):

Provided that where the Council, in consideration of any exigencies, considers itexpedient may declare that there shall not be any trading on any other day asmay be specified in the resolution under immediate intimation to SEC: Providedfurther that the Council may, from time to time, re-fix the trading days in theinterest of the Stock Exchange under immediate intimation to SEC.

TRADING PERIOD

Unless otherwise decided by the Council, the trading period shall be between10-30 AM to 2-30 PM on all trading days: Provided that the Council may, inconsideration of any particular circumstance or situation, extend, curtail or change the trading period, including session timings of any particular trading dayunder immediate intimation to SEC: Provided further that the power under thefirst proviso may also be exercised by the Management Team of DSE comprisedof the CEO, the Secretary and the heads of relevant departments of DSE, if, in

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their opinion, convening of Council meeting is not convenient or expedient in

consideration of the circumstances or situation concerned.

QUALIFICATION FOR TRADING

(1) A member shall qualify himself for trading if he –(a) obtains a registration certificate from the Commission issued

under regulation 5(4) of the Securities and ExchangeCommission (Stock-Dealer, Stock-Broker and AuthorizedRepresentative) Regulations, 1994;

(b) becomes a member of the DSE Clearing House;

(c) is not otherwise barred by DSE or SEC under any law, rule or regulations for the time being in force for trading.

(2) The DSE shall notify the name and other necessary particulars of amember whenever he incurs a disqualification for trading or becomesotherwise ineligible for trading.

TYPES OF MARKETS

There shall be the following four markets in the system, namely:

(a) Public Market - Matching in this market is automatic based on the touchlineprices, which follows normal settlement procedure.

(b) Spot Market - Matching in this market is also automatic, settlement of whichfollows procedure for spot transactions. The Management Team may put aninstrument on compulsory spot to curb volatility in prices of the instrument.

(c) Block Market - This is the market for bulk selling and buying on automaticmatching with equal quantity and best price (all or none condition) basis. Orders

entered in this market are immediately flashed on all trading workstations. Theminimum amount for a bid of bulk lot for a certain security shall be Tk. 0.5 (pointfive) million at market price unless otherwise fixed by the Council from time totime with the approval of the SEC.

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(d) Odd lot Market - Odd lot shares are traded in this market on automaticmatching with equal quantity and best price (all or none condition) basis.

Trading sessions - There shall be five sessions of trading period, namely12(a) Pre-opening session;3(b) Opening session;4(c) Continuous or Regular trading session;5(d) Closing session; and6(e) Post-closing session.7

Types of transactions- Orders may be grouped or categorized based on the

following, namely:-1(a) Price;2(b) Volume; and3(c) Validity.

SHARE CATEGORIZATION: A, B, G AND Z

A-Category Companies

Companies, which are regular in holding the current annual general meetings

and have declared dividend at the rate of ten percent or more in the Englishcalendar year.B-Category companies

Companies, which are regular in holding the current annual general meetings buthave failed to declare dividend at least at the rate of 10% of more in the Englishcalendar year.

Z-Category companies

companies which have failed to hold the current annual general meeting or has

failed to declare any dividend or which are not in operation continuously for morethan six months or who accumulated loss after adjustment of revenue reserve, if any is negative and exceeded its paid up capital.

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G-Category companies

Greenfield’s companies: the lone company, which is placed in this, group I sLafarge Surma Cement.

The Clearing and Settlement module

The Clearing and Settlement module provides the management of trade from thepoint of entry into the Settlement Pool trade database until it has been deliveredand settled and removed from the Settlement Pool. It consists of three major business processes.

Clearing:

participant trade reporting and affirmation, billing, assigning settlementinstructions.

Settlement:

The process of overseeing that delivery of all instruments to the buyer andpayment of all moneys to the seller has occurred before removing the trade fromthe settlement pool. In our Clearing and Settlement System, new netting systemwas being followed from 2nd July 2000.

A Group: Number of Instruments are 131 (112 + 08D + 11M) , Here D for Debentures & M for Mutual funds (Trading in Public Market with trade for tradesettlement facility for scrip only through DSE Clearing House on T+2, T+4 basis)

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The above cycle is valid for A ,B & G category

instruments

B Group: Number of Instruments are 39 (Trading in Public Market with trade for trade settlement facility through DSE Clearing House on T+2, T+4 basis)G Group: Number of Instrument is 1 (Trading in Public Market with trade for trade settlement facility through DSE Clearing House on T+2, T+4 basis)Z Group: Number of Instruments are 96 (Trading in Public Market with trade for trade settlement facility through DSE Clearing House on T+4, T+7 basis). "Z

Group" is marked in BASES columns in our TESA Trading Software.

This cycle is valid only for Z group instruments

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WHAT IS DEMATING SHARE?

All selling shares have to transfer (Pay in) to the clearing account of sellingBrokers from concerned BO account within settlement period. Regarding thecash payment the procedure will remain unchanged as mentioned above

THE LISTING REGULATIONS OF THE DHAKA STOCK EXCHANGE LIMITED

Notification No. SEC/Member-II, Dated 8th April 1996 In exercise of the powersconferred by section 34 (1) of the Securities and Exchange Ordinance, 1969 (XVIIof 1969), the Dhaka Stock Exchange, with the previous approval of the Securities

and Exchange Commission, pleased to make the following regulation, namely: -

LISTING OF COMPANIES & SECURITIES

Rule (A)(1) No dealings in securities of a company shall be allowed on the Exchangeeither on the Ready quotation Board or Cleared List, unless the company or thesecurities have been listed and permission for such dealing has been granted inaccordance with these Regulations.

(2) The permission under sub-regulation may be granted upon an applicationbeing made by the company or in respect of the securities in the manner prescribed at least ten days prior to issue of the first prospectus. The Exchange,in granting such permission will consider, among other things sufficiently of publicinterest in the company or the securities as determined by the Council in a well-

defined way.

(3) The Exchange shall decide the question of granting permission within amaximum period of six weeks from the date of closure of subscription lists. Incase the permission is refused, the reasons thereof will be communicated to theapplicant and the Commission within six weeks from the date of closure of subscription lists.

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(4) The Council will be the sole authority to grant, defer or refuse suchpermission and may for that purpose, relax any of these regulation subject only

to two-third majority of the councilors present at such meeting of the council andso resolving by the majority of them.

Rule (B)

(1) The application for listing shall be made by the applicant-company or onbehalf of the security in the prescribed form and will be accompanied by thefees, specified in the Regulations.

(2) The Council may require additional evidence, declarations, affirmations andinformation as also other forms to be filled up reasonable and relevant to

application for listing, and all such requisitions shall be deemed to be prescribedrequisitions for the purpose of a proper application for consideration by theCouncil for listing.

(3) If an application together with the additional information referred to in sub-regulation (2) is not submitted, the Council may defer consideration or decline toconsider it in which case such application will stand disposed of as refused.

However, the applicant may move a fresh application after six months from thedate of such refusal unless the Council otherwise decides.

(4) An Applicant-company or security applying for listing shall furnish full andauthentic information in respect thereof and such other particulars reasonableand relevant to the application for listing, as the Council or the Exchange mayrequire from time to time. All routine particulars may be called for by theSecretary.

APPLICATION FOR LISTING

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0 The following documents and particulars duly certified by the company or theCompany or authorized representative presenting the security shall be submitted

to the Exchange at the time of application for listing or any time on demand bythe Exchange.

1. Application for listing as per Form I;

2. Memorandum & Articles of Association;

3. Copy of the Certificate of incorporation;

4. Copy of the Certificate of Commencement of Business;

5. Copy of the Feasibility Report, in case of a new project;

6. Copy of the certificate of registration of the industrial Units issued by theCouncil of Investment or any other competent authority;

7. Copies of all material contracts and agreements entered into or exchanged with foreign participants, machinery suppliers and anyother financial institutions;

8. Copies of Letter (s) of Credit established in favour of Machinery Suppliers,if linked with the public issue;

9. Copy of Consent order issued by the Commission;

10.Names of Directors along with directorship of other companies listed on

the Exchange;11.Draft prospectus/Offer for sale;

12.Auditors Certificate for the amount subscribed by the promoters/directors/subsidiaries/associates;

13.Copies of the agreements relation to issue to securities for considerationother than cash, if any;

14.Copy of underwriting agreement (if any);

15.Statement of audited accounts for the last 5 years or for a shorter number of years if the company is in operation only for such shorter period;

16.Statement showing the cost of project and means of finance;

17.Copies of the approval of tax-holiday application under Ordinance, 1984;

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18.Copies of the consent Letters from Bankers or Financial Institution to theIssues;

19.Application for submission of Under of Undertaking and payment of feesas per Form II;

20.Copy of approval of prospectus/offer for sale from Commission; and

21.Any other documents/material contract and such other particulars as maybe required by the Exchange or by the Council and/or by the Commission;

CDBL (Central Depository Bangladesh Limited)

Central Depository Bangladesh Limited (CDBL) was incorporated as apublic limited company on 20th August 2000 to operate and maintain the CentralDepository System (CDS) of Electronic Book Entry, recording and maintainingsecurities, accounts and registering transfer of securities; changing theownership without any physical movement or endorsement of certificates andexecution of transfer instruments, as well as various other investor servicesincluding providing a platform for the secondary market trading of Treasury Billsand Government Bonds issued by the Bangladesh Bank. CDBL went live with theElectronic Treasury Bills Registry of Bangladesh Bank on 20th October, 2003.CDBL started Equity Market operations on 24th January, 2004 with one pilotstock.

CDS system:

Buying/selling through Stock Brokerage house and another way is stocktrading, which is done by individuals. The brokerage system is controlled by CDSsystem. From this they look at the current stock price of any company’s shareand the buy/sell price given by the people who trade shares through brokeragehouses.

The buy/sell order form is where people will give their name and the member number they have given by brokerage house. Then they place the name of thecompany, the number of shares and how much price they r asking for selling or what price they r willing to buy shares. If anybody‘s demand for share price meetthe sell price then the main trading occurs.

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After the trading, individuals receive money 2/3 days later. This is written inCDBL system as T + 1, 2, 3….

Under the CDS system there are about 50-55 enlisted companies. Most of themare a class companies and they are from different groups. There are almost 285enlisted companies in DSE and out of the number, below 30% are under DSEsystem and used by breakage house.

(TESA)Tandem Electronic SecuritiesArchitecture

TESA SYSTEM

The application, which runs in DSE for trading, is called TESA (TandemElectronic Securities Architecture). TESA has two parts: MSA (Member’s Server Application) & TWS (Trader workstation). MSA is the “Gateway” between thetraders and the Stock Exchange, which manages all the transactions anddatabase operations between the traders and the Trading Engine. TWS is theFront-end Application closer to investors, where they can submit Buy/Sell ordersfor their desired securities

PRINCIPAL FUNCTIONS OF TESA

Market Information: Supplying all market information needed to formulate thebuy 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 pricesmatch.

Trade Reporting: Trade execution reports are provided to each tradeparticipant, to the settlement system and / or the depository and to the market.

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Index calculation: Calculates and publishes market indices (DSE General Index& Weighted Average Index.)

Market Access: Provide exchange members with efficient affordable GUI-basedtools for accessing the market

DIFFERENT MARKET SUPPORTED BY TESA

A Central Trading System supports four different markets for trading. PublicMarket, Spot Market, Black Market and the Oddlot Market. You can submitorders to any of these markets through the TWS application. There are four

options while submitting an order to the Central Trading System.

• If anyone wants to Buy or sell some shares and se4ttle the trade duringthe normal settlement process, he or she should submit the order to thePublic Market.

• Some might want to buy or sell shares and he or she needs the settlementwithin 24 hours then they should submit the order to the Spot Market.

• If someone wants to buy or sell shares in very large qualities, then youshould submit your orders to the Black Market.

• If you want to buy or sell shares in oddlots or small lots, them you shouldsubmit your orders to the Oddlot Market.

TRADING SESSIONS

TESA conducts trading in-5-phases.

Enquiry: In this session Brokers can logon to the system. No order will besubmitted in this session. No trade will be executed. Only previous orders can bewithdrawn in this session

Opening: The Opening is a pure, single-price auction. All buy and all sell ordersare compared and calculate the open-adjust price. No trades will be executed inthis session

Continuous Trading: During this phase, participants enter orders and

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immediate execution or for inclusion in the book. Automatic matching andexecution takes place based on best price/ first in, first out trading rules

Closing: Closing prices are calculated and disseminated to market participants

Post Closing: In this session all trades will be executed only closing prices

Enquiry: Market will be closed in this session & other facilities like the previousenquiry session

HOW BROKERS AND AGENTS MAKE THEIR PROFIT

A broker is a representative of an investor who is the intermediary of buying and selling shares, debentures and stocks. They work under theauthorized agent of stock exchange. Their main source of income is thecommission what they get from their agent. And an agent generates moneythrough Laga and Hawla, which they collect from the Stock Exchange after aday.

DSE LIBRARY

Library is another important section of DSE. Here they reserve all theinformation about their quoted companies. Like, companies’ monthly review,annual report, half yearly report, brochure etc. they stored all the companiesinformation according to the sector wise.

In the library they have access through internet and the officials can seethe transaction of stocks. They have a scan machine through which they canupload much information about companies. There has one receptionist is sited

outside the library. If anyone wants to enter there he or she must be signed up ina sheet to the receptionists. In the library they kept all daily newspapers in a veryrespectable manner. Anyone can go through that the data what they stored aboutall the companies, if anyone needs that data, they cannot take outside thosecatalogs, or annual reports. He or she has to write anything sitting in the libraryand have arranged seats. Officials of library-

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o Library research officer – Hosna Ara Parvin.

o Library publication officer – Shafiqur Rahaman.

o Asst. Receptionist – Nurul Islam.

CONCLUSION

To keep pace with the globalization of securities trading, Dhaka Stock Exchangehas taken dynamic and bold initiatives in evolving an over-all policy to modernizeand automate the trading facilities offered to its members and investors. Mostnoticeable area of development is the exchange's trading, equity, and clearingsystem. Finally, it was a great experience for our entire group member. We come to know

various aspects about DSE. How it works, how brokers deals with the market,how share price rises and falls etc. At last we want to thanks to Md. Delower Hossain and SK. G. Kuddus for helping us to provide the information aboutDhaka Stock Exchange.

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Bibliography

1. The listing regulation, modified up to 22nd

July 1999

2. http://www.cdbl.org

3. http://www.dsebd.org

4. Monthly Review of Dhaka Stock Exchange.

5. Kuddus, SK. G. Chief Executive. M. Securities Ltd. Dhaka StockExchange Ltd.

6. Hossain, Md. Delower. Programming Officer. Dhaka StockExchange Ltd.

Documents

Final Project DS Exchange