Role of CSE to Develop the Capital Market of Bangladesh Course Id: MBA- 502 (MIT) SUBMITTED TO: SHAJIB KUMAR GOUSH PROFESSOR SCHOOL OF BUSINESS DEPARTMENT UNIVERSITY OF INFORMATION TECHNOLOGY & SCIENCE SUBMITTED BY: A. M. MAHFUZUR RAHMAN RMBA BATCH- 29TH ID NO: 09435096 SESSION: 2009-2010 DATE OF SUBMISSION: 14 AUGUST. 2009. LETTER OF SUBMISSION Dated: 14th August, 2009 Shajib Kumar Goush university lecturer School of Business Department University of information technology & science Subject: Submission of Term Paper Report. Dear Sir,

I am very glad to submit a Term Paper Report titled as “Role of CSE in Development of Capital Market of Bangladesh” which is organized as a precondition for the 29th MBA curriculum. I have tried my best to gain practical experience in CSE and also tried to reflect the same in report with my limited scope and knowledge. I have gathered about realistic awareness throughout this report preparation. I hope that I have been able to fulfill our academic necessities. I wish your hearty consideration, if there is any deviation in my report and also thank you for your friendly cooperation.

Yours truly, ____________________________________________________________ __________ Mohammad Sayfur Rahman RMBA 29th Batch Id No: 09435097 Session: 2009-2010 University of information technology & science Acknowledge At the very outset we would like to pay our solemn gratitude to the Almighty who has turned all our effort into a great success. It is a great pleasure for us to present this report, on ‘Chittagong stock exchange (CSE)’. For the successful completion of this report we would like to thank some people, without their help my paper would have been an incomplete one.

First of all we would like to thank our course instructor “Shajib Kumar goush” for selecting such an interesting topic. We would also like to thank him for his continuous guidance and support. We would like to thank him for giving me the opportunity to be a part of this term paper. Our humble thank goes to him for helping us a lot for a better understanding, Then we would like to thanks “The Internet” which helped us to find all the necessary information. We must thank to our “University library” for giving us the opportunity to search the book.

Finally, heartiest appreciation goes to all our MBA-502(MIT) associates and to all the special people who motivated us. Although we have come to the end of our journey at 8th Mayl 2009, it has given us the utmost confidence that would help us to face any greater challenges we encounter. Objective of the Study The prime purpose of the study is to fulfill the academic requirements of MBA program. Another important purpose of the study is to evaluate the performance of CSE. The objectives of the study can be depicted as follows: ? To control the financial institutions. ? To regulate the capital market. To protect the interest of investors in capital market. ? To develop the capital market. ? To ensure proper issuance of securities and compliance of law relating to securities. ? To evaluate the activities of CSE. ? To examine the performance of the CSE in terms of ? To suggest some policy measures for the improvement of stock market in general CSE in particular ? To learn practically what we read theoretically ? To gain indispensable experience regarding – • Share pricing • Index calculation i. All share price index ii. CSE 30 index • Volume of Trade • No. of the companies To know the stock market of Bangladesh ? To identify the strength, weakness, opportunities, and threat of CSE ? To recommend some creative measure to resolve the problems Methodology of the study 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 collect all kinds if related data from the primary and secondary source. ( Primary data : For collecting primary data I did follow interview method. There are several types of interview method. I used only two methods. They are : ? Personal interview : The primary data were collected through face-to-face interview with the CSE officials. • The primary data we collected through participation and discussion during the training session. • I had also collected information through interview with CSE members. • I had collected information through interview by the questionnaire with the investors by visiting various brokerage firms. ? Telephone interview : • Data were collected over phone with the CDBL officials. • Data were collected over phone with the depository participants. ( Secondary data : For secondary data I have gone through different types of publications.

I had also used published data. They are: • Various publications of CSE. • Te publication of the CSE’s Bazar Porikroma • Various publications of international bodies • Trade journal • Research reports connected with the stock exchange. • Internet • Supervisor’s information’s Scope of the study As I was involved myself at Chittagong stock exchange I knew various areas of the stock exchange, its managing procedures, working systems and environments which are very helpful to know & to increase our knowledge & to get more information and data regarding my study. The study is a part of academic curriculum.

The collected data and information have been tabulated, processed and analyzed carefully and report has been prepared in the present form to make the study more informative and useful. This study is conducted at Chittagong stock exchange ltd. To be acquainted with the real life situations especially with stock trading procedures. The information section of Chittagong stock exchange is very rich that’s why I was able to collect the required books, magazines, journals, brochures, portfolio and the internet facilities. CHAPTER 1 INTRODUCTION OF THE STOCK MARKET 1. Stock Market:

The stock market is one kind of capital market where the stocks of the different companies are traded. This is well known as stock exchange is a secondary market a trading market. It is structured to provide liquidity and marketability to the securities industry. It is a worldwide system designed to bring buyers and sellers together. 1. 2 Types of Stock Market: [pic] 2. A: Primary Market: The primary market is that market in which the companies issue their shares. The Primary market helps a firm to form their capital by selling their securities. It serves as the conduct for funds from the investors to the irms. The primary market is basically a market of new issue. In this the share issuing companies sell their shares to the public through the underwriters. Once the shares traded the functions of the primary market comes to and end. In this market there is no existence of the brokers. B: Secondary Market: In this market the brokers play an important role. There is no interference of the underwriters in that market. In this market the shares which are issued in the primary market are traded through the brokers. For instance, Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE).

There are some other types of Markets which are as follows: [pic] 3. Types of Primary Market Placement Securities are issued in the primary market by one or more of the following methods: A: Public Issue An offer to the public by an issuer is issued through a prospectus for subscription. This is the most common method of primary market placement in Bangladesh. B: Private Placement An offer to specific known persons selected by the sponsors for procuring subscription. C: Right Issue An offer in which existing shareholders are offered new securities in proportion to their existing holdings.

D: Offer for Sale An invitation to the general public is given to purchase the stock of a company through an intermediary. 4. INTERMEDIARIES Stock Exchange member companies, merchant and commercial banks, insurance companies, investment and finance companies work as intermediaries to play the following roles: • Manager to the Issue The manager to the issue prepares the prospectus and is responsible for ensuring full and fair disclosure about the issue and the issuer. The issue manager has to impart a Due Diligence Certificate which is published along with the prospectus. • Underwriters

Underwriters justify the price of the issue and guarantee purchase of any non-subscribed portion. Members of the Exchanges, Merchant banks and Insurance Companies are the leading underwriters. 5. Importance of existence of and efficient stock Market: Stock market is an essential part of capital market. The economy of a country largely depends on a strong capital market. Contribution of any stock exchange generally leads to economic growth by increasing the funds to finance industry and other enterprises. Stock exchange is an independent company formed by shareholders and members.

It can take various decisions independently. The objectives of stock exchange is to provide a market place along with facilities for bringing together the buyers and sellers of securities, promote just share and equitable principles of trade, protect the interest of investors. 1. 6 Securities and Exchange Commission (SEC) The Securities and Exchange Commission (SEC) was established on 8th June, 1993 under the Securities and Exchange Commission Act, 1993. The Chairman and Members of the Commission are appointed by the government and have overall responsibility to administer securities legislation.

The Commission, at present has three full time members, excluding the Chairman. The Commission is a statutory body and attached to the Ministry of Finance. Members perform the following functions Serve as the members of the Commission and supervise its management. Provide policy direction to industry and staff and promulgate legally binding rules. Act as an administrative tribunal for decisions on the capital market. Mission of the SEC is to Commissions main functions are: CHAPTER 2 A brief discussion about CSE BACKGROUND The Chittagong Stock Exchange (CSE) began its journey in 10th October of 1995 rom Chittagong City through the cry-out trading system with the promise to create a state-of-the art bourse in the country. Founder members of the proposed Chittagong Stock Exchange approached the Bangladesh Government in January 1995 and obtained the permission of the Securities and Exchange Commission on February 12, 1995 for establishing the country’s second stock exchange. The Exchange comprised of twelve Board members, presided by Mr. Amir Khosru Mahmud Chowdhury (MP) and run by an independent secretariat from the very first day of its inception.

CSE was formally opened by then Humble Prime Minister of Bangladesh on November 4, 1995. MISSION The Chittagong Stock Exchange believes that a dynamic, automated, transparent stock exchange is needed in Bangladesh. It works towards an effective, efficient and transparent market of international standard to serve and invest in Bangladesh in order to facilitate the competent entrepreneurs to raise capital and accelerate industrial growth for overall benefit of the economy and keep pace with the global advancements. OBJECTIVES Develop a strong platform for entrepreneurs raising capital; • Provide a fully automated trading system with most modern amenities to ensure: quick, easy, accurate transactions and easily accessible to all; • Undertake any business relating to the Stock Exchange, such as a clearing house, securities depository center or similar activities; • Develop a professional service culture through mandatory corporate membership; • Provide an investment opportunity for small and large investors; • Attract non-resident Bangladeshis to invest in Bangladesh stock market; • Collect preserve and disseminate data and information on stock exchange; • Develop a research cell for analyzing status of the market and economy. MILESTONES |12th February 1995 |Bangladesh Government approved CSE |1st April 1995 |Incorporated as a limited company | |10th October 1995 |Floor Trading started | |1st January 1996 |Became corresponding member of World Federation of Exchanges (Former FIVB) | |2nd June 1998 |First bourse to automate the nationwide trading system | |1999 |Established CSE Investor Protection Fund | |16th January 2000 |Convened SAFE | |26th January 2004 |Sponsored Central Depository Bangladesh Ltd. (CDBL) | LEGAL BASIS OF CSE As legal entity CSE is a not-for-profit public limited company. All of its 129 members are corporate bodies.

It has a separate secretariat independent of policymaking Board. The Board comprises of brokers and non-brokers directors with equal proportion to ensure the transparency. The Board constituted Committees to delegate such functions and authority as it may deem fit. There is an independent secretariat headed by a full time Chief Executive Officer. CSE activities are regulated by it’s own regulations and bye laws along with the rules, orders and notification of the SEC. MANAGEMENT TEAM The CEO is responsible for implementing the decisions of the Board, the day to day running of the exchange and formulating strategic plans for agreement with the board.

Following are the functions of the CEO and the various Departments of CSE: Systems: The Systems Department carries out the following functions: • deal with user queries • manage communication network • manage information technology developments and suppliers • manage internal information technology awareness • manage trading and operate Vista Settlement System • maintain masterfile • print daily reports and produce statistics Clearing, Settlement & Dp: This department is responsible for: • delivering cheques and shares to members • file and withdraw stock from vault • deal with bad delivery procedures • manage security receive shares from members opening of BO accounts and provide other depository services Market Operations: This department carries out the following functions: • monitor public information • monitor, receive and disseminate regular company information • on-line surveillance • inspection visits to members • receive and disseminate price sensitive company information • receive and manage investor complaints • receive and manage other complaints • manage and monitor OTC facilities Listing, Marketing & Education: This department is responsible for the following: • arrange training • ad hoc legal problems • liaison with Securities and Exchange Commission • maintain master organogram • maintain personnel files and staff list • monitor and record leave requests and leave taken • monitor rules and regulations monitor, receive and disseminate regular company information • respond to requests for information, members queries and complaints Finance & Administration: This department is responsible for the following: • act as company secretary • manage CSE finances • manage income tax deductions and payments CHAPTER 3 TRADING POLICY Eligibility of a Member for Trading a. Becoming the member of CSE Clearing House; b. Obtaining Dealership / Brokerage License from SEC; c. Not otherwise barred by CSE or SEC. Trading period Regular Trading schdule of Chittagong Stock Exchange The system will have four basic sessions (the time mentioned below is Bangladesh Local Time, which is GMT+6): |Pre-Opening Session |: |9:35 am-9:55 a. m. | |Opening Session |: |9:55 am-10:00 a. m. | |Trading Session |: |10:00 am-14:15 p. m. |Closing Session |: |14:15 pm-14:20 p. m. | |Close Price Trade |: |14:20 pm-14:30 p. m. | |Post Closing |: |14:30 pm-15:15 p. m. | Pre-Opening Session Order entry, deletion/modification of limit orders is only permitted, execution of orders shall not be done during this session. The previous day’s closing price and index will be available to the dealers/brokers during this session. Opening Session: During this session Matching of orders shall be done at opening price. The opening price for the day based on the orders input during the previous session will be calculated by the System.

The opening price of a security shall be the price at which maximum number of securities is matched. In the event of there being no trade for certain securities, then the last closing price for the security shall be made the opening price for the day. No order entry shall be permitted during this session. Continuous Trading Session: All types of orders will be accepted by the system during this period. Orders shall be executed during this session and if an order can not be executed in whole or in part, then it will be stored as an unfilled order. Unfilled orders from the pre-opening session shall be carried forward with time stamp to this session. Closing Session No order is received in this session.

Pending orders executable at closing price and orders ‘match at closing price’ shall be executed in this session. The closing price for a security shall be determined as per the weighted average price of all the trades in the last 30(thirty) minutes before the closing session. If there is no trade during the above specified time, the weighted average price of determination of closing price. If there has been no trade in the security during the continuous trading maximum 50 (fifty) number of trades preceding the above 30(thirty) minutes shall be taken for session the opening price of the security shall be treated as the closing price. Close Price Trading Session

Only ‘match at closing price’ order and all executable pending orders shall be executed in this Session at closing price. If any ‘match at closing price’ order is not executed in whole or in part, it will be removed from the system automatically and all other pending orders except the expired ones shall be carried forward to the following Trading Day. Post Closing Session The trading members will make enquiries, verify, and down load the daily transaction details in this session. Other Sessions The system will also have sessions for Odd Lot , Spot and Auction sessions . These sessions however may take place simultaneously with the normal trading sessions .

If brokers are interested to do trade in Odd Lot or are interested to see what stock is being sold and bought they will need to open the relevant windows only. 4. 3 STOCK INDEX INFORMATION 4. 3. 1 CSE – 30 (Monthly for three years): |Month |2007 |2006 |2005 | |January |3581. 13 |3102. 40 |3201. 39 | |February |3432. 30 |2893. 93 |3192. 53 | |March |3667. 20 |2904. 38 |3395. 4 | |April |3610. 03 |2712. 59 |2752. 90 | |May |4449. 04 |2734. 64 |3014. 94 | |June |4898. 85 |2756. 60 |3176. 74 | |July |5547. 53 |2909. 67 |2818. 50 | |August |5776. 98 |3277. 40 |3100. 0 | |September |5841. 37 |3255. 43 |3196. 04 | |October |- |3160. 45 |3224. 12 | |November |- |3171. 90 |3164. 13 | |December |- |3342. 46 |3159. 55 | 4. 3. 2 Sectoral Performance in 2006: |S. L. |Sector Name |No. of |No. Turnover |Turnover Value |% of Total | | | |Company |of Trades |Volume |(Tk. ) |Turnover | | | |Traded | | | | | |2 |TEXTILE & CLOTHING |30 |91,736 |43,759,770 |1,385,442,610. 10 |9. 87 | |3 |PHARMA & CHEMICALS |15 |151,346 |40,525,069 |3,105,249,859. 70 |22. 11 | |4 |FOODS & ALLIED PRODUCTS |18 |12,220 |17,945,840 |92,542,690. 00 |0. 6 | |5 |CEMENT |8 |39,588 |30,409,214 |1,168,277,075. 75 |8. 32 | |6 |ENG. & ELECTRICAL |14 |6,105 |2,540,064 |85,535,897. 50 |0. 61 | |7 |LEATHER & FOOTWEAR |6 |5,024 |5,829,414 |57,640,980. 00 |0. 41 | |8 |SERVICES & PROPERTY DEVELOPMENT |3 |20,212 |5,620,120 |238,570,752. 50 |1. 70 | |9 |PAPERS, PRINTING & PACKAGING |5 |15,288 |18,051,880 |253,566,452. 50 |1. 1 | |10 |POWER FUEL & ENERGY |3 |7,412 |509,237 |193,413,561. 50 |1. 38 | |11 |MUTUAL FUNDS |13 |34,889 |83,896,613 |428,896,464. 50 |3. 05 | |12 |BANKING |22 |199,965 |9,526,655 |5,140,688,890. 00 |36. 61 | |13 |CERAMIC |4 |1,506 |153,920 |14,657,378. 75 |0. 10 | |14 |ICT |7 |45,752 |45,589,250 |921,375,175. 00 |6. 6 | |15 |LEASING & FINANCE |9 |15,771 |1,263,766 |549,058,657. 00 |3. 91 | |16 |MISCELLANEOUS |12 |16,971 |4,282,905 |260,974,191. 25 |1. 86 | listing of securities: • The Company has to be a registered Public Limited Company • The minimum paid –up capital has to be BDT10 million (US$ 0. 20 mil ) • Share subscription must be at least 250. • Submission of the following is required: o Memorandum and Articles of Association o Certificate of Incorporation o Prospectus o Audited Accounts for the last 5 years or for the whole of the life of the company if less than 5 years old. A brief history of the Company since incorporation giving details of its activities including: re-organization, changes in capital structure and borrowings o A statement showing: dividends and cash bonuses and/or bonus shares or right shares issued during the last 10 years. o A copy of agreements or other documents relating to arrangements with intermediaries o A statement containing particulars of material contracts (e. g. for technical advice and collaboration), Name and address of the Directors and persons holding 10% or more of the equity security on the date of application together with the number of shares or debenture held by each. If any company fails to fulfill above requirement will not allowed to be listed in CSE

CHAPTER 4 Initiatives Taken By the CSE to Develop the Capital Market A. Central Depository System: While establishing Chittagong Stock Exchange in 1995, we felt the need for a central depository in the country and have since been working on a CDS. Now, very fortunately after a good five years, we are close to forming a CDS company. Isn’t it too long a time? Can we afford it? A CDS is an indispensable part of a stock market. We automated our trading system more than two years ago. Without a CDS, the full benefits of automation cannot be reaped. It would have been nice if we could have started a CDS simultaneously with the trading system automation.

Sri Lanka had started their CDS even before automating their trading system. India and Pakistan had established their CDS long ago. This is a G-30 recommendation, which has already been implemented by almost all the emerging markets of the world. But we are wasting time some unnecessary issues and trailing behind. We require a sophisticated system in accordance with the need of our market and at the same time this system should be scalable to accommodate the future needs of the market. This system should be run on a state-of-the-art technology as we went ahead while implementing our trading system. Procuring a software system for CDS is not the whole gamut of the game. This is only a part.

Educating the users of this new method of transaction settlement, dematerializing the physical form of securities, bringing all the relevant parties into confidence, and so on and so forth are all a very intricate and difficult job to perform before the whole system can be made operational. If we cannot reach a consensus at this very initial stage of the project, I am afraid we would never have a CDS in our market. B. Research & Information development: Research & Information development are essential pre-requisites for effective functioning and development of any stock exchange. Chittagong stock exchange has Research and information department. This section deals with research and development, library and public relation of the organization. Research is a foremost necessity for any stock exchange. In I order to fulfill the need CSE has established a research center and are keeping close contacts with the UN bodies, C.

Professionalism in Brokerage business & suspension of brokers: Brokerage business all over the world has reached its pinnacle. Now we can see that quite a great many brokerage houses are much bigger than many big stock exchanges. They are innovative, aggressive and doing their business professionally. Their services range from investment advice to the clients to asset management, investment banking to portfolio management and what not. Broker/Dealers in our country should consider the whole gamut of the financial services needed in the investment arena. They should diversify their business and create professionalism in their services. Development and reconstruction of our vulnerable market mostly depend on their professionalism and commitment.

Depending on seriousness of irregularity noticed in a members trading, trading terminal is suspended until such time the issue is resolved. The other activity of this department is: 1. Watching net high-low position 2. Taking Disciplinary action 3. Investigation into specific deals of brokers/dealers. D. Incentives for foreign portfolio: Bangladesh Govt. took a number measures to encourage foreign and local investors to invest in the securities market. Foreign portfolio investment exerts a profound impact on any stock market and helps ease a country’s resource constraints for development finance. Portfolio investment contributes towards creating additional funds for industrial finance, providing stock market liquidity, modern management skills and technology.

Though it was never too high, the inflow of portfolio funds has been tapering off in our market ever since 1996. If we want to attract them and maintain a continuous inflow of portfolio funds, we have to make our market stable, create market depth and ensure a congenial business atmosphere in the country. CSE Allows foreign investors to participate in IPO and right issue without any regulatory restriction & withdrawal of all regulatory restrictions on international portfolio investors for investing in the secondary securities market. E. Market rules and operations: As the market demands, it is natural to frame new rules of market operation and amend the existing ones from time to time.

These rules should be aimed at easing the operations of the exchange, protecting the interests of the respective parties, and maintaining a balance among the markets. Recently three different boards for the listed companies have been introduced in the exchanges, and the settlement of trades of those category shares has been made unique too. For the “Z” category of shares, the T+1 settlement system has been prescribed by SEC, which is not practicable for CSE brokers. Because CSE transactions are settled in three different places – Chittagong, Dhaka and Sylhet. CSE has planned to expand its trading network to more cities in the northern parts of the country. It is the mission of CSE to create investors country-wide and bring millions of them under the trading network of CSE in the long run.

We hope that thus we could develop a capital market, which will eventually contribute to rapid industrialization in the country. F. Transparency and accountability: Mainly transparency signifies the disclosure of all relevant, reliable and material information in an appropriate and objective manner. Now a day CSE authority under the supervision of SEC placed rules and strictly enforced without fear so that the companies are fair and square in their disclosures to investors and concerned parties. G. CSE as middleman: As this stage, it may be pertinent to keep in mind the key difference between capital market and financial intermediaries such as bank or life insurers.

Capital markets cut out middleman by bringing savers and borrowers face to face. But bank institutions stand between savers and investors in directing the flow of resources. There are two main types of capital markets. Firstly, equity markets, which are used for trading, company, shares. Secondly, bond markets were the debt of companies and governments are traded. Both equity and debt markets perform important functions in the economy by moving resources across space and time from where they are in surplus to where they are needed most, and by producing valuable information throw the prices they set, to firms households, and government to use and manage resources better. H. Over the counter market:

Over the counter market is a new facility launched by CSE, unlike in other stock exchange in the country, for the issuers, investors, capital market and the nation at large to assist in efficient capital formation by developing vibrant dynamic regulated capital market. 6. 7OTC has been established with a specific mandate to service small & medium innovative growth enterprises in raising resources efficiently through the capital market. I. Management information system (MIS): The idea behind establishment of computer based management information system at SEC is to achieve better efficiency and accuracy in day to day office work as well as capital market supervision and monitoring .

The Securities and Exchange Commission Automated System (SECAS) project was initiated in September, 1998 under ADB technical assistance. The project includes establishment of LAN cable system and installation of local area network among all the workstations at SEC and development of MIS software to meet automation needs of its different departments. Major activities of the project implementation occurred during June -July 2000. These activities are listed below. • LAN cables system acquisition, its installation and testing. • LAN hardware and networking system acquisition, its installation, testing and commissioning. • Customized MIS software system acquisition and its development, debugging and testing.

A brief description of these three components and their implementation status are given bellow: LAN CABLE SYSTEM INSTALLATION: SEC office accommodation consists of three floors-15th and 16th floors Jiban Bima Tower and 5th floor at adjacent annex building. A fiber optic backbone with redundant connectivity has been established across three floors so that data transmission does not get affected due to huge electrical lines in Tower building. At present the cable system has capacity to provide 106 connection nodes. In future it can also be expanded. The cable system has been tested over the period after its installation which is already completed satisfactorily. LAN Hardware and Network Installation:

LAN hardware installation mainly includes servers, workstations, network printer’s etc. installation and networking among them. SECAS has one primary network server (Windows NT), one backup network server, one database server (MS SQL Server), 35 workstations (Windows NT) and three network printers in three floors which are already installed. Mirroring and tape backup has been installed to protect data against accidental data corruption. LAN hardware installation and networking is now about to be completed. MIS Software Development: SECAS MIS software is customized software whose back end is MS SQL Server 7 and front end is Visual Basic 6. It includes ten modules as under: 0 Legal Affairs Personal information 0 Supervision & Monitoring 0 Compliance and Enforcement 0 Registration & Licensing 0 Corporate Finance 0 Surveillance 0 Executive Information 0 System Administration The modules were designed on the basis of needs of respective departments. The vendor has development all the ten modules up to certain levels. Review, resting and debugging are now on going. Successful completion of development, testing debugging, installation and data entry of the MIS software may be dated at the end of December, 2000. Two deputy directors (MIS) have close observation on the entire process of installation development of SECAS project.

They also assist the engineers and developers assigned by the contractors, as they require any technical suggestion and guideline. 6. 5 ANALYSIS OF FINDINGS: 1. The country networking warranted regional settlement of securities and accordingly CSE has been settling transaction at all its trading region from the every first day. The current settlement system of daily meeting on rolling settlement T+5, however, is a severe hindrance to this regional settlement despite this fact CSE has been rendering this service till today at the expense of boundless hardship particularly in transporting millions of shares between three region everyday. 2. The automation of CSE trading system was the biggest event of the year 1997 for this institution.

The most significant feature of the CSE trading system is its widen-area network which enable the CSE members to do on-line real time trading from three places-namely Chittagong, Dhaka and Sylhet- by logging in trough normal telephone facilities at the cost of a local phone all charge only with the opportunity to expand to anywhere I the country in the fact the CSE’s communication network thorough the satellite is capable of supporting trading from any corner of the world and it has been discreetly installed upon the prudent decision of the CSE board in view of the growing future trends of interaction between the global capital markets. The second most important feature of this system is that dealers/brokers can trade from multiple terminals using a single phone line through LAN or WAN network within their officers or beyond. These two outstanding features of the CSE present trading system have added a new dimension to stock-trading in Bangladesh with the result of reaching the benefits of the most modern technology of stock investment in the present day world to the door-steps of millions of investors. 3.

The activities of the research cell have considerably improved during the last year. Portfolio is being published regularly with increasingly better content, sharper analysis and greater quality. The initiative of publishing such a journal has been appreciated by almost all the quarters of the capital market. 4. A CSE web site has already been launched on the internet where the CSE, rules and regulations, regulations information regarding trading listing, settlement, listed company financial performance and the like have been trained in the CSE Automated trading System and in the investors to get the information on real time movement of stock prices. 5.

The CSE Board ahs earmarked the development of human resources as a top priority on the CSE agenda, Dealers/ Brokers have been trained in the CSE Automated trading system and in the MINTS, the brokerage back office software had been installed I the member’s officers by CSE. 6. In 1998 CSE has consolidated the system by making all necessary alterations to it and promptly upgrading sit as and when new SEC rules called for adaptation or tuning CSE automated the settlement system to a great extent in so far as the regional settlement in concerned. CSE made the whole system Y2K compliant both front and back ends at the same assisted the members regarding their Y2K compliance. 7. CSE has incurred loss 1998 and unless the turnover increases it will have to face financial hardship in the coming years.

There is no alternative of increased of increased turnover for an exchange to survive and reach a solid level. 8. CSE experienced a smooth operation of its newly established screen based trading system to date since its installation in June 1998. Given the state of telecommunication infrastructure in the country, the extent of experience in operating a sophisticated computerized system on a country wide area network and level of management standard in a developing country, CSE’s performance can be said to have been just super beyond expectation. CHAPTER 5 Conclusion 7. 1 Problems of CSE in the development of capital market. (Most of the members of CSE are not rendering optimum services to the investor’s. 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. (Some stock exchange members act only at brokers, i. e. , they buy and sell on behalf of the clients on receipt of specified trading commission. They do not undertake the market making roles. (Stock market efficiency depends upon the availability of reliable and unbiased information about the capital issue and companies. Though existing provisions in the companies act ensure disclosure of adequate information though prospectus, but several defects are noticed in practice. (Raising the number of curb operators. There has been general allegation by the investors that there has been some fraudulent acts insider trading which may have contributed to the abnormal fluctuation the pries of transparency, systematic deficiency and management inadequacies in the conduct of the trade by the stock exchange. • Lack of proper and adequate disclosures o Certifiers of financial statements and Property value’s of the company are the identical o Management and Owners (Councilors) of CSE are entwined o Lack of enforcement with the compliance of rules and regulations o Corporate governance – sponsor-owners are managing the firm. All most all cases, no professional management are hired to run the affairs of the listed company. 7. 2 Suggestions to remove the CSE’s problem: a.

The dormant members of stock exchange should be surveyed very strictly. Such members should be compelled to either trade or give up their membership. b. Market makers create both demand for & supply of securities and to the consistency in the prices. So it is recommended to make necessary provisions in stock exchange by laws for permitting market maker’s activities. c. To minimize the chances of insider trading legal provisions should be made that, no stock exchange member would be allowed to become directors of any listed company. d. In Bangladesh, we should follow the practices of developed capital markets & not allow curb market anywhere. e.

The average investor must have access to all information that might help the right investment decision. SEC can institute either a set up or to encourage the formation of investors associations under its umbrella. f. Credit rating enables the investors to judge the viability of the company for investment. Bangladesh capital market can accommodate some credit rating agencies. Case Study CASE STUDY:-1 Mr. Jalal ahmed is a student of Chittagong University. He has just completed his BBA degree. He invested in primary market in June 2006. He invested in secondary market in July, 2007 at first his capital was 30000 . At present his capital is 700000. He is not willing to take the share business as his profession.

He has said that, he wants to take it as his side business. Because in our country the share market is not well organized & it is not possible to anyone to take the share business as a profession CASE STUDY:-2 Mr. Abul Kalam is a service holder. He works in Eastern Bank Ltd. His age is 50. At first he started his share business by investing tk. 100000 in primary market in 2004. In 2006 he entered in secondary market. He has told that secondary market is more profitable than primary market, if you have huge knowledge & experience. At present the market is downward, according to him this is because of rumor. Most of the investors in our country are not conscious.

More over most of the companies are not honest about the distribution of dividend. Case study:-3 Mrs. Momena Akhter is a house wife. She started her share business in 2005 by investing in primary market. Her capital in primary market was 25000 only. But now her capital is 126700. She is not willing to enter in the secondary share market. Because this market contains high risk which is not possible to bear herself. She is investing her small amount of money just to mobilize rather than depositing in an account. Conclusion: Steady development and efficient operation of the capital market are fundamental to the accelerated economic growth of a country.

The capital market is the intermediary through which the surplus money of the society can be mobilized and then channeled into productive investments with the eventual aim of fostering industrial development, which will in turn lead the country to the target economic growth. Realizing this fact, Bangladesh undertakes economic reform programs and giving up the past systems of economic controls and restrictions to let the capital market operate in a more flexible and competitive environment. Due to privatization and economic reform programs, stock markets in Bangladesh have great potentially to become successful. Actually, no better alternatives way is suitable like a stock market to strengthen the financial base of a country, to rise up its development activities and gain economic release. ———————– Stock market Primary market Secondary market Stock market First market Second Market Third Market