Reforms, be it in the case of human resources or technology operating in any system, usually produce discomfort, suspicion and dissatisfaction initially among the beneficiaries of hitherto prevalent inefficiencies and drawbacks of all sorts. The reforms -- still far short of the actual requirements -- that have been carried out in the Bangladesh stock market following the bubble burst in the early part of December, 2010, are no exception. The reforms that deserve special mention are the demutualization of the bourses and the introduction of the new trading technology platform replacing the old one. However, the reforms in question have been interlinked.
Demutualisation that separates the management affairs from the day-to-day trading activities of a bourse is a reform that has been long overdue in the Bangladesh capital market. Notwithstanding the fact that demutailisation is no panacea for all the problems facing the country's bourses, it has got all the potential to streamline the management of bourses, ensure discipline in their working, raise the level of efficiency and transparency in all matters, including daily share transactions, and reduce the scope for manipulation. Only 20 months have gone by since the demutualisation of the premier bourse, the Dhaka Stock Exchange (DSE). The period is too small to show major achievements.
Yet the introduction of the new trading technology platform, incorporating the world's number one provider of stock exchange trading systems NASDAQ's X-stream INET and the cutting-edge broker order and execution management systems of the award-winning US-based company, the FlexTrade Systems, truly is an achievement. The platform is expected to go a long way towards beefing up the efficiency of the DSE. It has been possible only because of the demutualisation. However, the vested interests who had drawn undue benefits for themselves through the old management system of bourses did never like the idea of demutualisation. But the collapse of the market in 2010, which was their handiwork, had only expedited the demutualisation process.
The vested interests, apparently, are also opposed to the new technology that includes trading, clearing and market surveillance. The same NASDAQ platform is in operation in over 80 international exchanges in the USA, Europe, Asia, Australia, Africa and Middle East. Similarly, FlexTrade Systems' technology is being used by 175 institutional customers across the world. The latest trading technology, as it appears to be the case, has created problems for manipulative activities in stock trading in the bourses. One has reasons to be suspicious about the remarkable fall in the volume of trade in bourses from the very day the new technology was introduced. Genuine investors should be happy that an efficient trading platform, which has surveillance software, is in place.
So, the reduced transactions at the bourses could have been due to the withdrawal of manipulators from the market, fearing detection. The board of directors and the current management of the DSE deserve appreciation for brining in the next generation trading technology through consultation with the securities regulator and the entire broking community. However, other reforms need to be carried out boldly to stop recurrence of the 1996 and 2010 stock market episodes in the future. Opposition from vested quarters or pains that would come in the way must not distract their attention from the reform path. The country needs a strong and vibrant stock market that would be a constant source of funds for the economy.
