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Executive Summary

The project on Stock Exchange is an attempt to study an overall primary market and secondary market of Bangladesh. It helped to know and study the parameters opted by all the Stock Exchange and the companies who are operating themselves under the rules and regulation of Stock Exchange. The performance of Stock Exchange has registered a significant upward in recent times. Right from the beginning Stock Exchange attract every person as it has become common to see car on road every day and being a student of B.B.A. we learnt a lot from this project and it would helped us a lot in making our career.

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Introduction
A stock exchange is a regulated market which provides services for stock brokers and traders to trade stocks, bonds, and other securities. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets are driven by various factors that, as in all free markets, affect the price of stocks (see stock valuation). There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-thecounter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities. According to Husband and Dockerary, "Stock exchanges are privately organized markets which are used to facilitate trading in securities." Organized and regulated financial market where securities (bonds, notes, shares) are bought and sold at prices governed by the forces of demand and supply. Stock exchanges basically serve as (1) primary markets where corporations, governments, municipalities, and other incorporated bodies can raise capital by channeling savings of the investors into productive ventures; and (2) secondary markets where investors can sell their securities to other investors for cash, thus reducing the risk of investment and maintaining liquidity in the system. Stock exchanges impose stringent rules, listing requirements, and statutory requirements that are binding on all listed and trading parties. Trades in the older exchanges are conducted on the floor (called the 'trading floor') of the exchange itself, by shouting orders and instructions (called open outcry system). On modern exchanges, trades are conducted over telephone or online. Almost all exchanges are 'auction exchanges' where buyers enter competitive bids and sellers enter competitive orders through a trading day. The stock exchange is the important segment of its capital market. If the stock exchange is wellregulated function smoothly, then it is an indicator of healthy capital market. If the state of the stock exchange is good, the overall capital market will grow and otherwise it can suffer a great set back which is not good for the country. The government at various stages controls the stock market and the capitals market.

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A capital market deals in financial assets, excluding coin and currency. Banking accounts compromises the majority of financial assets. Pension and provident funds insurance policies shares and securities. Financial assets are claim of holders over issuer (business firms and governments). They enter low different segment of financial market. Those having short maturities that are non-transferable like bank savings and current accounts set the identification of the monetary financial assets. This market is known as money market, Equity, Preferential shares and bonds and debentures issued by companies and securities issued by the government constitute the financial assets, which are traded in the capital market.

Securities provide for investor.

Tax Benefits planning and exemption.

Optimum return on investment.

Cautious Approach.

Knowledge of Market.

Ex

Exchange of Securities Transacted.

Cyclopedia of Listed Companies.

High Yield.

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Authentic Information

New Entrepreneur encouraged.

Guidance of Investor & Company.

Equity

HISTORY OF STOCK EXCHANGE IN BANGLADESH


Stock Exchange was established on 8 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.

STOCK EXCHANGES IN BANGLADESH


There are two stock exchanges in Bangladesh.

1. Dhaka Stock Exchange (DSE) 2. Chittagong Stock Exchange (CSE)

Dhaka Stock Exchange (DSE):


History:
Dhaka Stock Exchange (Generally known as DSE) is the main stock exchange of Bangladesh. It is located in Motijheel at the heart of the Dhaka city. It was incorporated in 1954.
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Dhaka stock exchange is the first stock exchange of the country. As of 18 August 2010, the Dhaka Stock Exchange had over 750 listed companies with a combined market capitalization of $50.28 billion. The necessity of establishing a stock exchange in the then East Pakistan was first decided by the government when, early in 1952, it was learnt that the Calcutta Stock Exchange had prohibited the transactions in Pakistani shares and securities. The provincial industrial advisory council soon thereafter set up an organizing committee for the formation of a stock exchange in East Pakistan. A decisive step was taken the second meeting of the organizing committee held on the 13th march, 1953. In the cabinet room, Eden building, under the chairmanship of Mr. A. Khaleeli, secretary government of East Bengal, commerce, labor and industries department at which various aspects of the issue were discussed in detail. Then the central governments proposal regarding the Karachi Stock Exchange opening a branch at Dhaka did not find favor with the meeting who felt that East Pakistan should have an independent stock exchange. It was suggested that Dhaka Narayanganj Chamber of Commerce & Industry should approach its members for purchase of membership cards at RS.2000 each for the proposed stock exchange. The location of the exchange it was thought should be Dhaka, Narayanganj or Chittagong. An organizing committee was appointed consisting of leading commercial and industrial personalities of the province with Mr. Mehdi Ispahani as the convener in order to organize the exchange. The chamber informed its members and members of its affiliated associations of the proceedings of the above meeting, requesting them to intimate whether they were interested in joining the proposed stock exchange. This was followed by a meeting, at the chamber of about 100 persons interested in the formation of the exchange on 07.07.1953. The meeting invited 8 gentlemen to become promoters of the exchange with Mr. M Mehdi Ispahani as the convener and authorized them to draw up the memorandum and article of association of the exchange and proceed to obtain register under the companies act.1913. The other 7 promoters of the exchange were Mr. J M Addision-Scott, Mr. Mhodammed Hanif, Mr. A C Jain, Mr. A K Khan, Mr. M Shabbir Ahmed and Mr. Sakhawat Hossin. It was also decided that membership fee was to be RS.2000 and subscription rate at 15 per month. The exchange was to consist of not more than 150 members. A meeting of the promoters was held at the chamber on 03.09.1953 when it was decided to appoint Orr Dignam & Co., solicitors to draw up the memorandum and articles of association of the stock exchange based on the rules of stock exchange existing in other countries and taking into account local conditions. The 8 promoters incorporated the formation as the East Pakistan Stock Exchange Association Ltd. on 28.04.1954. As public company, on 23.06.1962 the name was revised to East Pakistan
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Stock Exchange Ltd. Again on 14.05.1964 the name of East Pakistan Stock Exchange Limited was changed to "Dhaka Stock Exchange Ltd."

At the time of incorporation the authorized capital of the exchange was RS. 300000 divided into 150 shares Of RS. 2000 each and by an extra ordinary general meeting adopted at the extra ordinary general meeting held on 22.02.1964 the authorized capital of the exchange was increased to TK. 500000 divided into 250 shares of TK. 2000 each. The paid up capital of the exchange now stood at TK.460000 dividend into 230 shares of TK. 2000 each. However 35 shares out of 230 shares were issued at TK. 80, 00,000 only per share of TK. 2000 with a premium of TK. 79, 98,000. Although incorporated in 1954, the formal trading was started in 1956 at Narayanganj after obtaining the certificates of commencement of business. But in 1958 it was shifted to Dhaka and started functioning at the Narayangonj Chamber Building in Motijheel C/A. On 1.10.1957 the stock exchange purchase a land measuring 8.75 kattah at 9F Motijheel C/A from the government and shifted the stock exchange to its own location in 1959. First incorporated as East Pakistan Stock Exchange Association Ltd in 28 April 1954 and started formal trading in 1956. It was renamed as East Pakistan Stock Exchange Ltd in 23 June 1962. Again renamed as Dacca Stock Exchange Ltd in 13 May 1964. After the liberation war in 1971 the trading was discontinued for five years. In 1976 trading restarted in Bangladesh, on 16 September 1986 DSE was started. The formula for calculating DSE all-share price index was changed according to IFC on 1 November 1993. The automated trading was initiated in 10 August 1998 and started on 1 January 2001. Central Depository System was initiated in 24 January 2004. As of November 16, 2009, the benchmark index of the Dhaka Stock Exchange (DSE) crossed 4000 points for the first time, setting another new high at 4148 points

Legal Control:
The Dhaka Stock Exchange (DSE) is registered as a Public Limited Company and its activities are regulated by its Articles of Association rules & regulations and bye-laws along with the Securities and Exchange Ordinance - 1969, Companies Act - 1994 & Securities & Exchange Commission Act - 1993.

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Formation:
Dhaka Stock Exchange (DSE) is a public limited company. It is formed and managed under Company Act 1994, Security and Exchange Commission Act 1993, Security and Exchange Commission Regulation 1994, and Security Exchange (Inside Trading) regulation 1994. The issued capital of this company is Tk. 500,000 which is divided up to 250 shares each pricing Tk. 2000. No individual or firm can buy more than one share. According to stock market rule only members can participate in the floor and can buy shares for himself or his clients. At present it has 238 members. Market capitalization of the Dhaka Stock Exchange reached nearly $9 billion in September 2007 and $27.4 billion on Dec 9, 2009.

Management:
The management and operation of Dhaka Stock Exchange is entrusted on a 25 members Board of Director. Among them 12 are elected from DSE members, another 12 are selected from different trade bodies and relevant organizations. The CEO is the 25th ex-officio member of the board. The following organizations are currently holding positions in DSE Board: Bangladesh Bank ICB President of Institute of Chartered Accountants of Bangladesh President of Federation of Bangladesh Chambers of Commerce and Industries President of Metropolitan Chambers of Commerce and Industries Professor of Finance Department of Dhaka University President of DCCI (Dhaka Chamber of Commerce and Industry)

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Chittagong Stock Exchange (CSE)


History:
The Chittagong Stock Exchange (CSE) began its journey in 10th October of 1995 from 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 Hon'ble Prime Minister of Bangladesh on November 4, 1995.

Vision
Aspire a global standard transaction place of securities and financial product.

Mission
Practice a set of core values to build competency in compliance, diversification and technology so that an accessible platform, market confidence and wealth maximization scope can be ensured.

Core values
Value for people Transparency Excellence Harmony Commitment Integrity

Timeline
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1 April 1995 CSE incorporated as a company. 10 October Floor trading started in cry out system. 4 November 1995 formally opened by then former Prime Minister Begum Khaleda Zia. 30 May 2004 Internet based Trading system opened.

Trading hours
Market opens at 11 am local time. Market closes at 3 pm local time.

MANAGEMENT OF STOCK EXCHANGE


Management of stock exchange is done an elected body of members. These bodies are known by different names in different stock exchange. These governing bodies are powerful bodies enjoying extensive administrative power of management and control over their respective stock exchange the day-to-day function of the stock exchanges are executed by the sub-committee like the defaulters committee listing committee, settlement committee etc.

The Objectives of the Stock Exchange


Stock exchanges consist of the physical spaces, materials, labor, expertise and regulatory oversight allowing the issue, purchase and sale of common stock. Common stock is the means by which publicly traded companies are funded, owned and controlled. The financial services industry, including brokerages and others that deal directly with stock exchanges, is a large sector in its own right. The enormous growth in some industries would be impossible without their firms being organized as corporations and issuing common stock.

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Capital Formation
One of the most important objectives of a stock exchange is capital formation. This refers to the accumulation of vast quantities of money necessary to start large ventures. Power plants, automobile production facilities, computer chip manufacturers and many other endeavors require tens or hundreds of millions of dollars of investment before they can produce any profit. Without corporate organization, this accumulates capital (money) while dispersing ownership, many of these projects would not be possible.

Connecting Traders:
The stock exchange also facilitates trading. One of the advantages of corporate organization is that stakeholders may sell their interest to another party. At any one time, hundreds or even thousands of individuals may wish to sell their shares of stock, while as many investors may wish to purchase the same security. Stock exchanges put in place the infrastructure necessary to connect these buyers and sellers. Many stock exchanges occupy physical buildings in which traders, brokers and other agents of the system work. Other exchanges occupy no centralized physical location and operate through telecommunication and computer networks.

Security:
The operators of stock exchanges, in cooperation with their governments, have designed and implemented laws and regulations determining how the system should function. These rules are intended to protect the investor from unfair advantages taken by people possessing special knowledge. They also obligate people who have entered into contracts to honor those contracts or face criminal prosecution. The goal of regulation is to allow people who may not always trust each other to do business with each other, because they trust the system. Some regulation is put in place to protect against unintended consequences of an unregulated market. For example, the "uptick rule" states that before a short contract (a "bet" that a stock will decline) can be written on a security, the price must increase, at least incrementally. This prevents a struggling stock from being shorted, which can decrease confidence in its strength and lead to more shorting and a further decline.

Economic Indicator:
Though not originally intended to function as such, stock exchanges also work as instruments to quantify the state of an economy. Even a casual observation of the general trends on major stock exchanges can give some insight into the state of a national or regional economy, or even the global economy.
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Increase business turnover Modernize trading system Ensure effective relationship management Achieve high level of confidence & professionalism Engage in product and market diversification Contribute to capital market policy development Ensure exchange related quality services

Functions of Stock Exchange


Stock Exchange commission Established for the purpose of assisting, regulating and controlling business of buying, selling and dealing in securities. Stock exchange provides a ready and continuous market for purchase and sale of securities. It provides ready outlet for buying and selling of securities. Stock exchange also acts as an outlet/counter for the sale of listed securities. Stock exchange is useful for the evaluation of industrial securities. This enables investors to know the true worth of their holdings at any time. Comparison of companies in the same industry is possible through stock exchange quotations (i.e. price list).

Stock exchange accelerates the process of capital formation. It creates the habit of saving, investing and risk taking among the investing class and converts their savings into profitable investment. It acts as an instrument of capital formation. In addition, it also acts as a channel for right (safe and profitable) investment. Stock exchange provides safety, security and equity (justice) in dealings as transactions are conducted as per well-defined rules and regulations. The managing body of the exchange keeps control on the members. Fraudulent practices are also checked effectively. Due to various rules and regulations, stock exchange functions as the custodian of funds of genuine investors.

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Listed companies have to comply with rules and regulations of concerned stock exchange and work under the vigilance (i.e. supervision) of stock exchange authorities. Stock exchange serves as a platform for marketing Government securities. It enables government to raise public debt easily and quickly. Stock exchange provides a clearing house facility to members. It settles the transactions among the members quickly and with ease. The members have to pay or receive only the net dues (balance amounts) because of the clearing house facility. Healthy speculation, keeps the exchange active. Normal speculation is not dangerous but provides more business to the exchange. However, excessive speculation is undesirable as it is dangerous to investors & the growth of corporate sector. Stock exchange indicates the state of health of companies and the national economy. It acts as a barometer of the economic situation / conditions. Banks easily know the prices of quoted securities. They offer loans to customers against corporate securities. This gives convenience to the owners of securities.

Prohibiting insider trading in securities.

Regulating the substantial acquisition of shares and take-over of companies.

Undertaking investigation and inspection, inquiries and audit of any issuer or dealer of securities, the Stock Exchanges and intermediaries and any self-regulatory organization in the securities market.

Conducting research and publishing information.

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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).

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Announcement of Price sensitive or other information about listed companies through online.

STOCK TRADING
OVERVIEW
The marketing of the securities on the stock exchange can be done through member of the stock exchange. These members can be either individuals or corporate bodies. For the process of trading in stock exchange there is the basic need for a transaction between an individual and the broker execute customers order to buy or sell on the stock exchange trading ring. The exchange of scrip between the member of the exchange in from of buying or selling is called trading Broker is the member of recognized stock exchange and helps the customers in buying or selling the securities for the brokerage that he receives.

Trading Method

Listing securities are traded on the floor of recognized stock exchange where its member traded. An investor is not permitted to enter the floor of stock exchange and he has trust the broker to:

Negotiate the best price for the trade.


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Settle the account, i.e. payment for securities sold on due date.

Take delivery of securities purchase.

TYPES OF TRADING

Trading in stock exchange is conducted in two ways:

1) Ready delivery contract.

2) Forward delivery contract.

BASKET TRADING SYSTEM

The Basket Trading System provides the arbitrageurs an opportunity to take advantage of price differences in the underlying Sensex and Futures on the Sensex by simultaneous buying and selling of baskets comprising the Sensex scraps in the Cash Segment and Sensex Futures. This is expected to provide balancing impact on the prices in both cash and futures markets.

The Exchange has commenced trading in the Derivatives Segment with effect from June 9, 2000 to enable the investors to, inter-alias, hedge their risks. Initially, the facility of trading in the Derivatives Segment was confined to Index Futures. Subsequently, the Exchange has introduced the Index Options and Options & Futures in select individual stocks. The investors in cash market had felt a need to limit their risk exposure in the market to movement in Sensex.

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To participate in this system, the member-brokers need to indicate number of Sensex basket(s) to be bought or sold, where the value of one Sensex basket is arrived at by the system by multiplying TK.50 to prevailing Sensex. For e.g., if the Sensex is 4000, then value of one basket of Sensex would be 4000 x 50= i.e., TK. 2, 00,000/-. The investors can also place orders by entering value of Sensex portfolio to be brought or sold with a minimum value of TK. 50,000/for each order.

PROCEDURE OF TRADING
1. Select of broker

The first step is buying or selling of share is to select a broker for transaction business on behalf of the investor. The trading of securities on the stock exchange can be done through members of the exchange.

An investor prefers to select a broker who shall. Act with due skill. Care and diligence in the conduct of all his business. Not create false market either singly or in concert with other.

2. Opening an Account with the Broker

The next step to open account with the broker. It helps the investor to provide his credit worthiness, if the clients were not to do margin money with the broker.

3. Selection of Securities

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This is application for buying securities. The investor may be consulted with broker and take advise for selection of securities.

4. Selection of Time for Trading

This is important to get the best advantage from buying or selling the securities.

5. Placing an Order

Various method of placing an order with the broker has been evolved to give the broker leverage when he is on the floor of the stock exchange.

6. Preparation of Contract Note

SEBI circular of 4th Feb. 1991 requires that all member of the recognized stock exchange issue contract note to the investors on the execution of trade. Brokers, therefore issue contract note to the client, who gives the name of the company, price of trade, brokerage, time of execution, provision regarding arbitration etc. in term of the bye-laws of stock exchange, this is statutory requirement and mandatory.

7. Settlement

The settlement is the process whereby payment is made by brokers who have made purchase and share delivery by those brokers who have made sales.

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CONCLUSION
Companies come to the stock market in a variety of different ways and for a variety of reasons. As a private investor, one can sometimes get an allocation of newly-issued shares, but often the issue will be confined to institutional investors. With internet shares, and the movement towards direct online IPOs, this may change for the better. Most of the time one will be trading in a company's ordinary shares on the secondary market. Companies issue other types of share - notably preference shares, convertibles, and warrants and even if one doesnt own them they may have an effect on their dividend entit lement if they dilute earnings. A scrip issue is designed to improve marketability of ordinary shares, and does not dilute ones ownership. A rights issue is designed to raise more money for the company, and existing shareholders will be invited to buy first. One has a choice about whether to exercise ones rights, but if one do not, their ownership may be diluted.

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