A few days back, the Dhaka Stock Exchange (DSE) installed a new trading system that replaced the old Tesa-type. It was claimed that the new one is most modern and the problems that were with the old one will no longer be there. The new one modelled on the American and European trading vehicles will pave the way for derivatives and commodity trading.
The DSE asserted that the new trading system is faster, swift and is capable of executing many more orders in a given time than the old one. But unfortunately, the investors, who are the main stakeholders in the system, are not seeing the new trading system in this way. They are unhappy, aggrieved and disheartened with it. Their discontent is so much that many of the retail investors are closing the BO accounts and packing up at least for the time being. A large number of investors have adopted a wait-and-see policy before making further investment.
The investors have reasons to be unhappy with the new Nasdaq-type (as it was called) trading system, as it lacks many features or advantages sought by the investors at large. For example, the old trading vehicle provided ticking prices or quotations of stocks' last transacted prices on the monitors of the computers or the trading machines. Investors could have looked into the quotations and would have taken immediate decision whether to buy or sell the stocks they hold in the portfolios.
The new trading vehicle does not show the ticking prices or the last transacted prices of the stocks. The present system keeps investors in the dark as to what is happening with respect to price changes to the other stocks they hold in the portfolios. Not only that, the previous one was so simple that by a single click or by giving a single command, the operator could show or tell the waiting and asking investors what was the last price, the highest and the lowest prices and the volume of particular stock transacted. The new trading system also provides these information but can be had or seen only with the operators giving more commands and spending more time. By any standard, the old Tesa-type system was much more easy and investors' friendly. That system was to an extent also exciting. The present one provides information in a roundabout way and even does not show clearly and vividly whether an order to buy or sell a stock is executed. Order executions are to be seen by going into the system and with the operators giving different commands.
Another demerit of the new system is that it does not take orders against the investors' ready money in the account. No order execution takes place even if they place orders of the amount equivalent to the money available for investment. In other words, this system prevents investors from investing all the money available in the account. This results in the fall of the turnover of the investing public or so to say of the DSE's. The lower turnover we witnessed since the installation of the Nasdaq-type trading system was contributed by the system itself.
Our observation shows that the new trading system of the DSE has turned out to be a burden on the investors. The installed system is so much unfriendly that it is either driving them out of the market or forcing them to go inactive. Investors are not finding the things easy, not to speak of feeling comfortable with the system.
In the last few days, we saw a feeling of deprivation and a condition of what to do among the investors. The DSE's fault is that it replaced an easy-to-handle and investors' friendly trading system with a complex heavyweight trading system which we do not know in what way it is more suitable for a market like ours.
We do not know whether this new type of trading system is being used in other markets like ours and also in our neighbouring markets like those of India, Pakistan and Thailand. Many say the newly-installed trading system is suitable for OTC type market like New York's Nasdaq stock exchange where companies with small capital base, especially technology companies, are listed.
We wonder whether the DSE authority out of over-enthusiasm purchased a trading system which is not suitable for our market. One basic difference between our market and other mature markets is that in our market, investors attend physically in the brokers' houses whereas in the mature markets, investors do not attend physically. Our investors are mostly retail ones with small capital and the retail investors here are the backbone of the market. We also presume that the newly-installed trading system is more costly than the previous one. In that case, a question should haunt the minds of the concerned people as to who will bear the increased cost of the system? Apprehension is that at the end, the cost will be shifted onto the investors in the form of many more charges. With a dip in the turnover and an increase in the cost of the system, how will the DSE maintain its income and expenditure?
The concerned authorities, including the regulator and the DSE, should re-examine the newly-installed trading system and bring necessary changes before further damage is done. We need an investor-friendly trading vehicle. The regulator is there to see how best investors' interest can be protected.
The writer is Professor of Economics University of Dhaka. abuahmedecon@yahoo.com
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