The securities regulator has said that it is not logical to allow the existing board of the Dhaka Stock Exchange (DSE) to continue until holding an election for formation of a new board in line with the bourse's demutualisation scheme.

But the existing DSE board has sought to continue until holding the election, as there is no mention about an interim board in the demutualisation law.

"The securities regulator has not accepted the list of existing directors who will be on the first board of a demutualised DSE. That's why I think there is no logic to accept the existing board as the first board," said Professor Helal Uddin Nizami.

He said the DSE proposal would not come into effect unless a regulatory decision goes in favour of the premier bourse.

Meanwhile, the Bangladesh Securities and Exchange Commission (BSEC) has sought the opinion of the ministry of finance (MoF) on the first board of a demutualised DSE.

The DSE board on Wednesday decided that a proposal would be placed in the extraordinary general meeting (EGM) on October 29 to the effect that the 24 existing directors would also be there on the 'interim board' of a demutualised DSE.

Minhaz Mannan Emon, a DSE director, said as per the Section 11 (a) of the Exchanges Demutualisation Act, 2013 an election would be held within ninety days since the date of demutualisation of an exchange.

"But there is no term of interim board in the law. So, where is the problem with allowing the existing board to continue until the election?" Mr. Emon told the FE.

He said: "The DSE board has no tendency to hang on to their positions violating the rules and regulations."

"We have abided by all conditions mentioned in the law and scheme. If there is no clause on interim board, then why will not the existing board be allowed to continue until the election?" Emon said.

Mr. Emon also said so far the DSE board continued to extend its cooperation and would continue its assistance in completing the process of demutualisation successfully.

The securities regulator approved the demutualisation schemes of the two bourses in the country on September 26. As per schemes approved, each of the bourses will have a 13-member board, where independent directors will be the majority.

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The regulator has detected notable number of short-selling by the newly set-up Instant Watch Surveillance System software

The securities regulator BSEC has warned the country’s two stock exchanges of short-selling and said the rate of breaching the securities rules increased in the recent times.

Short selling is the selling of a stock that the seller doesn’t own. More specifically, a short sale is the sale of a security that isn’t owned by the seller, but that is promised to be delivered.

“The commission has asked the stock exchanges to take necessary steps to refrain from short-selling executed by its member brokers,” said Bangladesh Securities and Exchange Commission in a statement on Tuesday.

The regulator has detected notable number of short-selling by the newly set-up Instant Watch Surveillance System software.

On charge of short-selling, the commission fined Hilly Securities, a member of the Chittagong Stock Exchange, Tk100,000. The brokerage firm sold 5,000 shares of First Securities Islami Bank Ltd on May 15.

Kabir Securities, another member of CSE, was also fined Tk500,000 for violating margin loan rules.

It provided loan for purchasing Z-category or junk shares to its clients in October and for transferring fund from consolidated customers’ account to its FDR account. Credit issued against Z-category shares is a violation of margin loan rules.

The BSEC has also directed the Dhaka Stock Exchange not to allot shares to its member Don Securities Ltd after Demutualisation until settlement of allegation of swindling money of its clients.

Since August, 2010, the commission suspended trading activities of the brokerage firm in response to the complaints of its clients who brought allegation of not returning money and share for long.

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The government's revenue earnings from the Dhaka Stock Exchange (DSE) fell more than 15 per cent in the first quarter (Q1) of the fiscal year 2013-2014, compared to the same period last fiscal year as the trading volume was on the decline.

The government bagged tax worth Tk 441.08 million in the first three month (July to September) of the current fiscal year compared to Tk 519.17 million in the same period last fiscal year, registering 15.04 per cent decline, according to statistics from the DSE.

The government earned the amount on brokerage commission and share sales by sponsor-directors and placement holders.

The DSE, on behalf of the government, collects the tax as brokerage commission and sponsor and placement shares at the rate of 0.05 per cent and 5.0 per cent respectively and deposits the amount to the government exchequer.

Among the total earnings of Tk 441.08 million in the first three month of the current fiscal year, the government earned Tk 327.81 million on brokerage commission and Tk 113.26 million on share sales by sponsor-directors and placement holders.

However, month-on-month government' earrings from DSE increased by 28.48 per cent in September compared to August in 2013. In September, the government earned tax worth Tk 144.28 million against Tk 112.30 million in August.

DSE officials said the tax collection declined in first quarter (Q1) in current fiscal year due to lower transaction following the sluggish trend in stock prices.

"A bearish trend in the capital market has pulled down the government's earnings from stocks, as the trading volume is on the decline," he said.

The DSE witnessed a daily average turnover of Tk 4.87 billion in the first three months of the current fiscal year while it was Tk 5.82 billion in same period last fiscal.

"The earnings are related to turnover. It's usual that tax will fall if turnover declines," said Akter H Sannamat, managing director of Union Capital.

"The turnover marked a decline in first three months in FY 2013-14, compared to same period last fiscal year, so did tax," said Mr Sannamat.

He also said: "The tax flow will rise when the market will be back on track."

Data showed that in the last three fiscal years, the revenue earnings of the government from the stock market declined at a stress due to lower turnover value following slide in shares prices.

In fiscal year 2010-11, DSE paid tax worth Tk 4.46 billion, in FY 2011-12 DSE paid worth Tk 2.72 billion and FY 2012-13 DSE paid tax worth Tk 1.27 billion on brokerage commission and share sales by sponsor-directors and placement holders.

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A group of investors staged protests in front of the Dhaka Stock Exchange yesterday as shares fell 1.67 percent.Investors under the banner of Share Market Investors Association demanded the government bring back normalcy to the market.They chanted slogans against Ahsanul Islam Titu, president of DSE, and M Khairul Hossain, chairman of Bangladesh Securities and Exchange Commission.

Demonstrations began at 12:45pm when the prime market index lost 40 points. DSEX, the benchmark general index of the DSE, finished the day at 3,882.33 points, after falling 66.11 points.

The government declared a stimulus package in November 2011 to stabilise the market, but it has not worked properly and failed to gain investors confidence, said Mizanur Rashid Chowdhury, president of Share Market Investors Association.

Bangladesh Bank also disbursed Tk 300 crore on August 27 under its Tk 900 crore refinance scheme to help the merchant banks and stockbrokers recover the losses in small investors’ portfolio, Chowdhury said.

“It has failed to have a positive impact in the market.” The institutional investors have remained inactive in the market. Investors went for selling shares and mutual fund units to bag profits ahead of Eid-ul-Azha, said Mohammed Rahmat Pasha, managing director of BRAC-EPL, a leading stockbrokerage.

It is natural for investors to go for bulk selling ahead of Eid, Pasha added. “Fears of a further decline in line with the index’s positioning below a psychological level of 4,000 points for the sixth consecutive session acted as a catalyst behind the selling pressure and forced the market to end negatively,” IDLC Investments said in its analysis.

In the meantime, investors continued to cash out their portfolios ahead of Eid, the merchant bank official said.Turnover, the most important indicator of the market, declined 6.83 percent to Tk 247 crore from the previous day.Of the 288 issues that traded on the DSE floor, 21 advanced, 239 declined and 22 remained unchanged.

A total of 0.66 lakh trades were executed with 6.29 crore shares and mutual fund units changing hands on the Dhaka bourse.Most major sector closed in the red: foods 0.9 percent, engineering 2.9 percent, textile 2.34 percent, cement 2.11 and non life insurance 2.09 percent.

Delta Life Insurance featured in the most traded stocks chart with 51,000 shares worth Tk 31.32 crore changing hands.Progressive Life Insurance was the biggest gainer of the day, gaining 9.96 percent, while Deshbandhu Polymer was the worst loser, plunging 15.51 percent.

The Chittagong Stock Exchange also declined on the day with its selective category index, CSCX, dropping 137.26 points, to close at 7,584.45 points.

Losers beat gainers 188 to 15, with nine issues unchanged on the port city bourse that traded 60.55 lakh shares and mutual fund units with a turnover of Tk 17.81 crore.

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