Bangladesh Capital Market: Operation, Success and Failure

MD. ENAMUL HUQUE

December 2013

Bangladesh Capital Market: Operation, Success and Failure

Introduction: Capital market provide lo!" term #$!d to e!trepre!e$r . A capital market i a market #or bot% debt a!d e&$it' ec$ritie ( )%ere b$ i!e e!terpri e a!d "over!me!t ca! ervice to tock rai e lo!"*term #$!d . A tock e+c%a!"e i a bod' t%at provide

broker a!d trader to trade tock ( bo!d ( a!d ot%er ec$ritie . ,a!"lade % %a t)o -tock E+c%a!"e :( D%aka -tock E+c%a!"e .D-E/ a!d C%itta"o!" -tock E+c%a!"e .C-E/. 0%e D%aka -tock E+c%a!"e .D-E/ i re"i tered a a 1$blic Limited Compa!' a!d it activitie are re"$lated b' it Article o# A ociatio! r$le 2 re"$latio! a!d b'*la) alo!" )it% t%e -ec$ritie a!d E+c%a!"e 3rdi!a!ce * 1454( Compa!ie Act * 1446 2 -ec$ritie 2 E+c%a!"e Commi io! Act * 1443. 0%e C%itta"o!" -tock E+c%a!"e .C-E/ be"a! it 7o$r!e' i! 10t% 3ctober o# 1448 #rom C%itta"o!" Cit' t%ro$"% t%e cr'*o$t tradi!" ' tem )it% t%e promi e to create a tate*o#* t%e art bo$r e i! t%e co$!tr'.

Operation:
A -tock E+c%a!"e:

e tabli %e li ti!" re&$ireme!t approve ( $ pe!d or remove li ti!" privile"e o# compa!ie mo!itor li ted compa!ie i! complia!ce )it% le"al re"$lator' provi io!

9e"$latio! o# -tock E+c%a!"e : 0%e ,a!"lade % -ec$ritie a!d E+c%a!"e Commi io! .,-EC/ e tabli %ed o! :t% ;$!e( 1443 atc a t%e re"$lator' bod' o# t%e co$!tr'< capital market t%ro$"% e!actme!t o# t%e -ec$ritie a!d E+c%a!"e Commi io! Act 1443. Mi

io! o# t%e ,-EC i to: 1rotect t%e i!tere t o# ec$ritie i!ve tor .

Develop a!d mai!tai! #air( tra! pare!t a!d e##icie!t ec$ritie market . E! $re proper i $a!ce o# ec$ritie a!d complia!ce )it% ec$ritie la) .

0%e Commi io!= mai! #$!ctio! are: 9e"$lati!" t%e b$ i!e market. 9e"i teri!" a!d re"$lati!" t%e b$ i!e o# tock*broker ( $b*broker ( %are tra! #er a"e!t ( merc%a!t ba!ker a!d ma!a"er o# i $e ( tr$ tee o# tr$ t deed ( re"i trar o# a! i $e( $!der)riter ( port#olio ma!a"er ( i!ve tme!t advi er a!d ot%er i!termediarie i! t%e ec$ritie market 9e"i teri!"( mo!itori!" a!d re"$lati!" o# collective i!ve tme!t c%eme i!cl$di!" all #orm o# m$t$al #$!d . Mo!itori!" a!d re"$lati!" all a$t%ori>ed el# re"$lator' or"a!i>atio! i! t%e ec$ritie market. 1ro%ibiti!" #ra$d$le!t a!d $!#air trade practice relati!" to ec$ritie tradi!" i! a!' ec$ritie market. 1romoti!" i!ve tor < ed$catio! a!d providi!" trai!i!" #or i!termediarie o# t%e ec$ritie market. 1ro%ibiti!" i! ider tradi!" i! ec$ritie . 9e"$lati!" t%e $b ta!tial ac&$i itio! o# %are a!d take*over o# compa!ie . U!dertaki!" i!ve ti"atio! a!d i! pectio!( i!&$irie a!d a$dit o# a!' i $er or dealer o# ec$ritie ( t%e -tock E+c%a!"e a!d i!termediarie a!d a!' el# re"$lator' or"a!i>atio! i! t%e ec$ritie market. Co!d$cti!" re earc% a!d p$bli %i!" i!#ormatio!. o# t%e -tock E+c%a!"e or a!' ot%er ec$ritie

Member %ip o# -tock E+c%a!"e : Nobod' ca! participate i! t%e tock tradi!" )it%o$t bei!" a member o# tock e+c%a!"e. 0%ere are t)o t'pe o# member* a/ Dealer: 0%e' ca! act a pri!cipal a!' b$' #or t%eir o)! acco$!t a!d ell ec$ritie #rom t%eir o)! i!ve!torie . b/ ,roker: 0%e' act a a"e!t o# ot%er a!d receive a commi io! #rom t%eir clie!t . 0%e' %ave !o ri"%t to b$' or ell #rom t%eir o)! i!ve!torie .

?$!ctio! o# a -tock E+c%a!"e: 0%e ma7or #$!ctio! o# a -tock E+c%a!"e are:

Li ti!" t%e compa!ie . 1rovidi!" t%e comp$ter ba ed a$tomated tradi!" ' tem o# t%e li ted ec$ritie . -ettleme!t o# tradi!". @i#ti!" o# %are A "ra!ti!" approval to t%e tra! actio!Atra! #er o# %are o$t ide t%e tradi!" ' tem o# t%e e+c%a!"e. Market admi!i tratio! 2 co!trol Market $rveilla!ce to preve!t market ab$ e i.e. ab!ormal priceAvol$me moveme!t( arti#icial tra! actio! ( #al e or mi leadi!" impre io! ( i! ider tradi!"( etc. 1$blicatio! o# mo!t%l'( &$arterl' a!d 'earl' revie) a!d report . Mo!itori!" t%e activitie o# li ted compa!ie . B!ve tor "rieva!ce Cell .Di po al o# complai!t b'e la) 144C/. Admi!i tratio! o# B!ve tor 1rotectio! ?$!d .A per B!ve tor protectio! ?$!d 9e"$latio! 1444/ #or t%e protectio! o# t%e i!ve tor o# a de#a$lti!" member o# t%e -tock E+c%a!"e. A!!o$!ceme!t o# price e! itive or ot%er i!#ormatio! abo$t li ted compa!ie .

Li ti!": Ever' compa!' m$ t be li ted i! t%e -tock market #or )orki!" t%ereo! a!d t%e' %ave to #$l#ill vario$ #ormalitie . 0%e Li ti!" a!d Member %ip departme!t deal )it% t%e vario$ #ormalitie o#

li ti!" a!d member %ip )it% D-E. ?ormalitie related )it% t%e e!li tme!t o# a compa!' a!d member %ip a!d di c$ ed i! belo). B# t%e compa!ie )illi!" to e+pa!d t%eir market ma' appl' #or li ti!" )it% t%e D-E( accordi!" to t%e ma!!er pre cribed i! t%e Li ti!" 9e"$latio! . DLi ti!" Compa!'< mea! a Compa!' or a bod' corporate or corporatio!( )%ic% %a bee! li ted i! accorda!ce )it% t%e re"$latio! ( a!d )%o e ec$ritie are li ted a!d i!cl$de provi io!all' li ted compa!ie . U!le t%e compa!' or t%e ec$ritie %ave bee! li ted a!d permi io! #or $c% deali!" %a bee! "ra!ted( !o deali!" i! ec$ritie o# a compa!' %all be allo)ed. Eli"ibilit' #or Li ti!" 0%e Compa!' %a to be a 9e"i tered 1$blic Ltd. t%at m$ t be i!corporated i! ,a!"lade % $!der t%e Compa!ie Act.1446 )it% t%e o##ice o# t%e 9e"i tered o# ;oi!t -tock Compa!ie a!d ?irm . -%are to a li ted compa!' ca! be i $ed t%ro$"% primar' market or eco!dar' market. Applicatio! o# li ti!" Applicatio! #or li ti!" i! t%e tock e+c%a!"e %o$ld be made a per ?orm 1( $!der -ectio! .4/ o# t%e -ec$ritie a!d E+c%a!"e 3rdi!a!ce *1454 -ectio! 160 o# t%e Compa!ie Act. 1446( )it%i! 10 da' #rom t%e date o# p$bli % o# t%e Compa!'< pro per . 0%e tock e+c%a!"e %all "ra!t permi io! )it%i! a ma+im$m period o# 3 mo!t% #rom t%e date o# receipt o# li ti!" applicatio!. B! ca e( t%e permi io! i re#$ ed( t%e rea o! t%ereo# )ill be comm$!icated to t%e applica!t a!d al o to t%e -ec$ritie 2 E+c%a!"e Commi io! )it%i! 2 )eek o# t%e deci io!. B# re$ ed( t%e applica!t ma' move a #re % applicatio! a#ter i+ mo!t% #rom t%e date o# $c% re#$ al $!le t%e ,oard ot%er)i e decide . Doc$me!t to be $bmitted #or li ti!": At t%e time o# appl'i!" #or t%e li ti!"( t%e #ollo)i!" doc$me!t to be $bmitted: 1. B! ca e o# 1articipator' capital( a cop' o# t%e tr$ t deed. 2. Copie o# a$dited acco$!t #or t%e la t 8 completed 'ear or a %orted a. N$mber o# 'ear i# t%e compa!' %a bee! i! e+i te!ce o!l' #or $c% b. -%orted period. 3. A Memora!d$m a!d Article o# A ociatio!. 6. ,rie# %i tor' o# t%e compa!' i!ce i!corporatio! "ivi!" detail o# it 8. Activitie i!cl$di!" a!' re*or"a!i>atio!( c%a!"e i! it capital tr$ct$re 5. A!d borro)i!" . C. Cop' o# A"reeme!t o# ot%er doc$me!t relati!" to arra!"eme!t )it%

:. 3r bet)ee! Ee!dor ( 1romoter ( U!der)riter ( ,roker . 4. Certi#ied copie o# a"reeme!t )it% Ma!a"i!" A"e!t( -elli!" A"e!t( 10. Ma!a"i!" Director a!d 0ec%!ical Director. 11. A tateme!t co!tai!i!" 1artic$lar o# material co!tract . 12. Certi#ied copie o# A"reeme!t )it% ,-,( ,-9-( BC, a!d a!' ot%er 13. ?i!a!cial i! tit$tio! . 16. ?orm 2 a pri!ted i! t%e li ti!" re"$latio! . 18. A deed o# U!co!ditio!al U!dertaki!" to abide b' t%e li ti!" re"$latio! o# t%e D-E.

Applicatio! #or Member %ip: A per compa!' re ol$tio!( to "et t%e member %ip i! D-E( it i !ece ar' to #orm a limited compa!' a!d o!e director )ill %ave to be elected a t%e repre e!tative #or deali!" )it% t%e tock e+c%a!"e. A! applicatio! to be $bmitted a per F?orm*Ga< alo!" )it% t%e #ollo)i!" doc$me!t :* H Memora!d$m o# A ociatio!( Article o# A ociatio! o# t%e compa!'. H 0a+ cleara!ce certi#icate. H Letter re"ardi!" permi io! #or o!*li!e tradi!". H Deed o# Declaratio! a per cla$ e 8 .b/ o# @e!eral 9$le a!d re"$latio! o# D-E. H 0)o copie tamp i>e rece!t p%oto"rap%.

Market -$rveilla!ce: D%aka tock e+c%a!"e %a it o)! $rveilla!ce ' tem to co!trol a!d mo!itor t%e market activitie partic$larl' re"ardi!" t%e crip traded. -$rveilla!ce Departme!t keep a clo e )atc% o! price*moveme!t o# cripI detect market ma!ip$latio! a!d mo!itor ab!ormal price a!d vol$me ( )%ic% are !ot co! i te!t )it% t%e !ormal tradi!" ' tem. 0%e activitie o# t%i departme!t are me!tio!ed %ere i! belo)* Circ$it ,reaker Co!trol

Circ$it breaker i a commo! a!d )idel' $ ed ' tem acro t%e -tock E+c%a!"e )orld)ide to co!trol t%e ab!ormal #l$ct$atio! o# %are price . 0%e limit o# Circ$it ,reaker at D%aka tock E+c%a!"e i me!tio!ed i! t%i report )%ile di c$ io! t%e activitie o# market 3peratio! Departme!t. 1re e!tl'( t%e #ollo)i!" r$le "over! t%e Circ$it ,reaker perce!ta"e val$e or ab ol$te circ$it breaker val$e: B! ca e o# di clo $re o# !e) i! a!' crip( t%e circ$it breaker perce!ta"e )ill be c%a!"ed to a Market 3peratio! peci#ied val$e a!d )ill per i t at t%i val$e #or a peci#ied !$mber o# da' . ?or !e) crip( #or peci#ied !$mber o# da' a#ter t%e #ir t tradi!" da'( t%e perce!ta"e i a Market 3peratio! peci#ied val$e. 0ill t%e #ir t tradi!" da' #or t%at crip( t%ere )ill be !o circ$it breaker perce!ta"e. B! ca e o# book clo $re( t%e E+c%a!"e )ill provide a! ab ol$te val$e o# circ$it breaker( )%ic% )ill be $ ed #or a Market 3peratio! peci#ied !$mber o# da' ( #ollo)i!" )%ic% it )ill revert back to t%e old val$e o# t%e circ$it breaker. -$ pe! io! o# -crip: J%e! price ri""i!" ca!<t be co!trolled eve! a#ter appl'i!" t%e e+i ti!" $rveilla!ce mea $re or i# a!' erio$ irre"$laritie $c% a lar"e &$a!tit' o# bad deliverie ( circ$latio! o# #ake %are certi#icate i! t%e market etc. i !oticed i! t%e market E+c%a!"e ca! $ pe!d tradi!" o# t%o e crip #or a period depe!di!" o! t%e it$atio!. Hi"% 0$r!over: -$rveilla!ce Departme!t o# t%e E+c%a!"e o! a da'*to*da' ba i carrie o$t a t%oro$"% t$d' o# t%e tradi!" patter! o# t%e top 10 cript b' t$r!over. -$c% a!al' i cover t%e price( t$r!over vol$me a!d val$e activit' b' vario$ member i! eac% o# t%e cript a!d al o t%e #$!dame!tal o# t%e Compa!'. Mo!itori!" !e)l' li ted %are : A per t%e i! tr$ctio! o# -EC circ$it breaker i !ot applied to t%e !e)l' li ted %are #or t%e #ir t #ive market da' . 0radi!" patter! i! t%i #ive da' o# t%e !e)l' li ted %are are a!al'>ed b' t%i departme!t to detect )%et%er t%e member %ave e!tered i!to a!' ma!ip$latio! or circ$lar trade to arti#iciall' prop*$p or prop*do)! t%e price . B# a!' certai! irre"$laritie are ob erved( t%e Di cipli!ar' Committee take actio! a"ai! t $c% member. -$ pe! io! o# 0rader A,roker Depe!di!" o! erio$ !e o# irre"$larit' !oticed i! a member< tradi!"( %i A%er tradi!" termi!al i $ pe!ded $!til $c% time t%e i $e i re olved. 0%e ot%er activitie o# t%i departme!t are: H Jatc%i!" !et %i"%*lo) po itio!.

H 0aki!" Di cipli!ar' Actio!. H B!ve ti"atio! i!to peci#ic deal o# ,rokerADealer . 0%e $rveilla!ce #$!ctio! are co!d$cted t%ro$"% t%e $rveilla!ce mod$le o# t%e comp$ter ' tem. 0%i ' tem $ $all' r$! ma!$all'. 0%e $rveilla!ce departme!t t%ro$"% it )ide i!#ormatio! o$rce carrie o$t t%i #$!ctio!. B! pectio! a!d A$diti!": 0%ere are t)o t'pe o# i! pectio! likel' K 1 9e"$lar B! pectio! K B! a re"$lar i! pectio!( t%e i! pector c%eck )%et%er t%e broker are mai!tai!i!" all t%e book o# acco$!t . 2 -pot or -pecial B! pectio! K B! t%i vi it or it i do!e o! a partic$lar item. ort o# i! pectio! t%e i! pector make a $rpri e

Je ca! )rite do)! t%e #$!ctio! o# t%i departme!t a #ollo) K 1. C%ecki!" )%et%er t%e broker are mai!tai!i!" r$le compa!' act( a!d i!come ta+ la). 2. Maki!" p%' ical vi it to t%e broker %o$ e -$rveilla!ce departme!t o# D-E. a a!d re"$latio! $!der -EC(

per t%e comma!d o# -EC or

3. -cr$ti!i>i!" t%e dra#t pro pect$ o# B13( a!d comme!ti!" over t%at. 0%e -EC decide )%et%er to allo) t%e B13 o! t%e ba i o# t%e comme!t made. Hereb' t%e #ollo)i!" poi!t are co! idered #or a e i!" t%e dra#t pro pect$ o# B13 K

A$tomated Cleari!" a!d -ettleme!t -' tem .CN-/: 0%e A$tomated Cleari!" a!d -ettleme!t -' tem .CN-/ i developed to a$tomate all po t trade activitie re"ardi!" cleari!" a!d ettleme!t. Bt mai! take%older are ,rokera"e %o$ e ( CD,L( Cleari!" ,a!k a!d D-E ?i!a!ce Divi io!. Ma7or activitie o# t%e ' tem are a belo)I Clearing: B! cleari!" proce D-E make pa'me!t b' credit i! tr$ctio! a!d deliver %are t%ro$"% CD,L cleari!" c%ed$le to b$'i!" broker.

Settlement: B! ettleme!t proce D-E receive all c%ar"e ( receivable amo$!t #rom elli!" broker a!d earmark elli!" %are i! elli!" broker cleari!" acco$!t t%ro$"% CD,L ettleme!t c%ed$le. 9e"$latio! 6 o# t%e -ettleme!t o# -tock E+c%a!"e 0ra! actio! 9e"$latio! 144: %a bee! "ive! e##ect time to time.

Ce!tral Depo itor' -' tem .CD-/ : Ce!tral Depo itor' ,a!"lade % Limited.CD,L/ )a i!corporated a a p$blic limited compa!' o! A$"$ t 2000 to operate a!d mai!tai! t%e Ce!tral Depo itor' -' tem.CD-/ o# Electro!ic ,ook E!tr'( recordi!" a!d mai!tai!i!" ec$ritie acco$!t a!d re"i teri!" tra! #er o# ec$ritie I c%a!"i!" t%e o)!er %ip )it%o$t a!' p%' ical moveme!t or e!dor eme!t o# certi#icate a!d e+ec$tio! o# tra! #er i! tr$me!t . ,a!"lade % -ec$ritie a!d E+c%a!"e Commi io! %a i $ed a Certi#icate to CD,L o! December 23( 2003 #or tarti!" depo itor' b$ i!e a a depo itor'. A depo itor' i like a ba!k #or %are i! tead o# mo!e'. B! tead o# %oldi!" %are i! t%e #orm o# certi#icate ( i!ve tor %ave acco$!t i! t%e depo itor' a!d are able to move ec$ritie a!d ettle tock e+c%a!"e tra! actio! b' a! electro!ic $pdate o# t%eir acco$!t . 0%e core ervice o# a depo itor' i t%e e##icie!t deliver'( ettleme!t a!d tra! #er o# ec$ritie t%ro$"% a comp$teri>ed book e!tr' ' tem.

,ook clo $re A 9ecord Date: J%ile a compa!' a divide!d( ri"%tA bo!$ %are or i!te!d to %old a!' A@MA E@MI it declare a book le"i lat$re clo er providerA 9ecord Date to re"i ter t%e !ame o# %are%older . 3!l' %are%older )%o e !ame appear o! t%e re"i ter a#ter t%e book clo $reA 9ecord Date are eli"ible to atte!d i! t%e A@MA E@M a!d al o to receive divide!d 2 bo!$ %are a!d e!titleme!t to ri"%t %are ( i# a!'.

Circ$it ,reaker:

Circ$it ,reaker i t%e ma+im$m permi ible deviatio! o# t%e price . peci#ied a perce!ta"e/ o# t%e i!comi!" order #rom t%e Circ$it ,reaker ,a e 1rice #or t%at i! tr$me!t. 3rder violati!" circ$it breaker )ill re $lt re7ectio! o# t%e order. Bt i a "ood tool to co$!ter price ma!ip$latio!.

Success:
?ollo)i!" are ome $cce 1/ Market capitali>atio!: 3$r tock e+c%a!"e %a %elped %$!dred i o# compa!ie to e+pa!d t%eir b$ i!e tock o# tock e+c%a!"e o# ,a!"lade %:

t%ro$"% #$!d rai i!" #rom t%e i!ve tor li ted i! t%e tock e+c%a!"e . 0%i %a %elped o$r eco!om' a lot. 0%i t%e mai! i!te!ded p$rpo e o# e tabli %i!" a!' e+c%a!"e. 3$r tock e+c%a!"e are per#ormi!" t%i #$!ctio! )ell.

2/ Dem$t$ali>atio!: 0%e D%aka a!d C%itta"o!" tock e+c%a!"e %ave t$r!ed i!to dem$t$ali ed e+c%a!"e a t%e co$!tr'< t)i! bo$r e "et certi#icate #rom t%e 9e"i trar o# t%e ;oi!t -tock Compa!ie a!d ?irm .9;-C/ o! 0%$r da'( 21 November 2013. 0%e D-E a!d C-E alread' %ave completed t%eir E@M o! November 2 a!d 3ctober 28 re pectivel'. 0%e #$ll dem$t$ali>atio! proce i till o!"oi!" )%ic% )ill be #$ll' ac%ieved t%ro$"% t%e electio! o# !e) member #or t%e ,oard o# Director . A per t%e dem$t$ali atio! act( bot% t%e tock e+c%a!"e %ave to %old electio! )it%i! 40 da' o# "etti!" certi#icate #rom t%e ;oi!t -tock Compa!ie a!d ?irm .9;-C/ to elect 13 member board . 3# t%e 13*member board )it% 3*'ear term( %are%older a!d o!e #rom trate"ic eve! director )ill be i!depe!de!t( #o$r #rom tock %are%older. B! additio!( t%e CE3 o# a

e+c%a!"e )ill act a a! e+*o##icio director %avi!" voti!" ri"%t . Corporate "over!a!ce i a ver' importa!t i $e #or a!' capital market. Dem$t$ali atio! )ill %elp to e! $re corporate "over!a!ce i! o$r tock e+c%a!"e . 3/ B!trod$ci!" $!i#orm #ace*val$e o# all compa!ie : No!*$!i#orm #ace val$e o# t%e ec$ritie $cce create co!#$ io! a!d mi *$!der ta!di!"

amo!" t%e i!ve tor . D%aka -tock E+c%a!"e %ad !o!*$!i#orm #ace val$e #or t%e ec$ritie a!d bo!d . No) D-E %a #$ll' made $!i#orm #ace val$e #or all t%e ec$ritie available o! t%e market. 0%ere are everal t%eorie t%at e+plai! t%e rea o! o# tock plit b' compa!ie . 0%e mo t commo! rea o! are to ac%ieve a! optimal price ra!"e #or li&$idit'( to ac%ieve a! optimal tick ma!a"eme!t < i! t%e #$t$re tock price. Eario$ i>e a!d to t$die o! i"!al t%e co!#ide!ce o# tock plit a!d market

be%avior %o) t%at t%ere are tock price mi"%t lead i!crea e i! tock price a!d trade vol$me i! t%e %ort term .Ad$da a!d Caroli!e. 2010/. B! D%aka -tock E+c%a!"e( t%e price o# mall #ace val$e .0k.10/ ec$ritie )ere

relativel' %i"%er t%e! bi" #ace val$e .0k. 100/ ec$ritie )%ere ot%er t%i!" remai! t%e ame. ,' Ma' 2010( -EC i! tr$cted all compa!ie to co!vert t%e #ace val$e o# ec$ritie to 0k.10 #rom vario$ per val$e t%at i!crea ed price level o# 0k. 10 %are $b ta!tiall' t%at i!#lated bot% t%e i!divid$al tock price a!d i!dice . 0%i tra! itio! %a bee! completed $cce #$ll'.

6/ -tre!"t%e!i!" t%e Market -$rveilla!ce -' tem ,ot% t%e tock e+c%a!"e %ave i!trod$ced po)er#$l a$tomated market $rveilla!ce

' tem )%ic% %a ide!ti#ied ma!' ab!ormal market be%avior i! t%e rece!t pa t a!d %a protected t%e i!tere t o# t%e mall i!ve tor providi!" timel' )ar!i!". ?or e! $ri!" i!ve tor < protectio! a!d $p%oldi!" tra! pare!c' i! t%e capital market( t%e -EC per#orm $rveilla!ce #$!ctio! t%ro$"% 3!li!e -$rveilla!ce -' tem o# -tock E+c%a!"e . 0%e tock e+c%a!"e are primar' re"$lator #or detectio! o# market ma!ip$latio!( price ri""i!" a!d ot%er re"$lator' breac%e . -EC keep co! ta!t vi"ila!ce o! t%e activitie o# tock e+c%a!"e to e! $re e##ective $rveilla!ce. 0%e -$rveilla!ce Departme!t o# -EC $ e bot% o!li!e a!d o##*li!e $rveilla!ce ' tem to #i!d o$t violatio! o# ec$ritie related la) i! ec$ritie tradi!" a!d al o to #i!d o$t )%et%er irre"$laritie %ave take! place or a!' ab!ormalitie e+i t i! ec$ritie tra! actio! . A part o# o!li!e $rveilla!ce( t%e -EC o##icial )atc% t%e dail' ec$ritie tra! actio! t%ro$"% !o!*tradi!" o#t)are a!d $rveilla!ce o#t)are a!d prepare report co!tai!i!" $mmar' o# dail' ec$ritie tra! actio! a!d ab!ormal tradi!"( i# a!'. 3! t%e ot%er %a!d( a part o# o##*li!e $rveilla!ce( t%e $rveilla!ce o##icial o# -EC $ e t%e -EC< o)! o#t)are to a!al'>e !ece ar' po t tradi!" i!#ormatio! a#ter collectio!. B# detailed i!ve ti"atio! i !eeded a#ter a!al' i t%e! propo al i placed be#ore t%e -EC to #orm a! e!&$ir' committee. B# a!' violatio! o# ec$ritie la) i #o$!d b' t%e e!&$ir' committee t%e! t%e matter i #or)arded to t%e E!#orceme!t Departme!t o# -EC #or !ece ar' le"al actio!.

Failures: 1/ Capital Market cra % i! 2011: ,a!"lade % tock market e+perie!ced la!d lide #all i! t%e #ir t &$arter o# 2011. 0%i ca! be ee! clearl' #rom D-E @e!eral B!de+ "rap%:

Bbra%im G%aled committee ide!ti#ied t%e #ollo)i!" broad #actor t%at ca$ ed t%e capital market di a ter: a/ 1rimar' B $e related 1roblem : Direct li ti!" i! 1rimar' i $e Ab$ e o# ,ook ,$ildi!" Met%od o# B13 Hi"% premi$m #or tock li ti!" Blle"al 1rivate placeme!t market A et 9eval$atio! o# Compa!ie be#ore li ti!" to c%ar"e %i"%er premi$m.

b/ -eco!dar' market related problem : Circ$lar tradi!" i! -eco!dar' market ,lock tradi!" -tock 1rice Ma!ip$latio! t%ro$"% 3m!ib$ Acco$!t $a!ce o# 9i"%t -%areA1re#ere!ce -%areA9epeat B13 etc.

c/ Brre"$laritie i! i

d/ 9ecomme!datio! o# -tock Divide!d b' compa!ie a"ai! t $!reali>ed 1ro#it e/ 9e"$lator' ?ail$re: B!co! i te!c' i! re"$lator' activitie -$pporti!" a!d le"ali>atio! o# $!et%ical activitie o# bi" B!ve tor Brre po! ible be%aviorA)eak!e i! ma!' area

?orm$lati!" )ro!" policie )%ic% %elped market pla'er .ma!ip$lator / Lack o# D$e Dili"e!ce Lack o# co*ordi!atio! bet)ee! -EC a!d -tock e+c%a!"e Allo)i!" ?i!a!cial B! tit$tio! to i!ve t i! capital market a""re ivel' -EC #ailed to take mea $re a"ai! t ma!ip$latio! o# #i!a!cial tateme!t

2/ ?ail$re to e tabli % a Commodit' E+c%a!"e: -EC( i! it A!!$al 9epot 2011*2012( e+pre ed it i!te!tio! to i!trod$ce commodit'

e+c%a!"e i! o$r capital market. A commoditie e+c%a!"e i a! e+c%a!"e )%ere vario$ commoditie a!d derivative prod$ct are traded. 0%i protect t%e #armer #rom price drop a!d t%e b$'er #rom price ri e . A commodit' e+c%a!"e ca! %elp o$r a"ric$lt$ral ector a lot. ,$t -EC %a #ailed to i!trod$ce a commodit' e+c%a!"e 'et.

3/ ?ail$re to e tabli % a eparate trib$!al: 3$r tock market %a e+perie!ced t)o ma7or cr$ %e eco!d time d$ri!" 2011. Eac% time i!ve ti"atio! irre"$laritie a!d ma!ip$latio! )%ic% co!trib$ted to o #ar: #ir t time d$ri!" 1445 a!d %ave revealed ome ma7or $c% cata trop%ic market #all.

U!#ort$!atel' t%e -EC %a #iled to p$!i % a!'o!e t%ro$"% le"al proced$re #or t%eir mi deed . -EC et "oal to e tabli % a eparate trib$!al #or t%e capital market to preve!t #$t$re ma!ip$latio! b$t t%i "oal )a !ot ac%ieved 'et.

Conclusion: Je believe t%at ,a!"lade % Capital Market i capable e!o$"% to $ppl' i"!i#ica!t amo$!t o# !ece ar' capital #or t%e p$blic a!d private ector . 0o e! $re t%i all t%e take%older !amel' merc%a!t ba!k ( broker*dealer ( a et ma!a"eme!t compa!ie ( io!all'. a$ditor ( credit rati!" a"e!cie ( private e!trepre!e$r ( tate o)!ed e!terpri e ( tock e+c%a!"e a!d re"$lator %ave to pla' t%eir role more pro#e

References:
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