DSE upgrades software sans omnibus trading provision

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Mohammad Mufazzal
The Dhaka Stock Exchange (DSE) has upgraded its online trading software - MSA-plus - without keeping any provision of trading through omnibus accounts to bring transparency in the stock market, officials said.
They said the country's premier bourse has developed the software in line with the Merchant Banker and Portfolio Manager Rules 1996, which included provision of opening separate BO (beneficiary owner's) account for each client of the merchant banks.
Omnibus account means an account opened and maintained by a CDBL participant for the purpose of holding its customers' securities without opening separate accounts in their own names.
The MSA (member's server application)-plus will be a bridge to real-time online trading, through which the investors themselves can execute the trade.
On February 18, the DSE trialed a mock trading with the newly developed software, which served more than 70 per cent of the bourse's requirements.
"We are in the favor of bringing transparency and accountability in the stock market. That's why we have developed the MSA-plus software, without keeping any provision for omnibus accounts," DSE senior vice president Ahsanul Islam told the FE.
He said according to the existing rules those who trade with the merchant banks must have separate BO accounts for the sake of ensuring their ownership of shares.
"It's not wrong to open omnibus accounts, as it has been practiced in other countries successfully. But the use of such accounts in Bangladesh hides the information, thus ultimately affecting the market."
He said it is not possible to reveal the clients' actual sell-buy information, executed through the omnibus accounts, as those are not separately linked with the Central Depository Bangladesh Limited (CDBL).
The probe committee, formed after the recent stock market debacle and led by Bangladesh Krishi Bank Chairman Khondkar Ibrahim Khaled, also blamed the invisible role of omnibus accounts behind the fiasco.
"In some cases of using omnibus accounts, the clients of merchant banks purchase shares without depositing any fund. This practice should be eliminated for bringing transparency and accountability in the market," Islam added.
He also said in the absence of separate BO accounts, the clients will not have any ownership of their shares, if a merchant bank becomes extinct.
DSE President Shakil Rizvi said they have decided in principle to wipe out the bad practices of omnibus accounts, and developed the MSA-plus software in line with the existing rules regarding portfolio managers.
When asked, whether they would allow the trades, conducted through omnibus accounts, both the DSE president and senior vice president said now the securities regulator will take decision in this regard.
"If the SEC tells us that we need not comply with the existing rules, we will create a provision for using omnibus accounts in our newly-developed MSA-plus software," they said.
According to the section 30 of the Merchant Bankers and Portfolio Manager Rules 1996, revised in June 2008, a portfolio manager will preserve the securities in separate BO accounts. In case of the securities, purchased collectively, a portfolio manager will protect those by allocating proportionately in separate BO accounts.
Bangladesh Merchant Bankers Association (BMBA) President Mohammad A Hafiz said they are executing trading through omnibus accounts in line with the existing rules.
"We are also in the favor of transparency. Earlier, we proposed the DSE to form a joint committee to find out the problems regarding use of omnibus accounts. But the committee is yet to be formed," Hafiz told the FE.
When asked about the problem in preserving the clients' securities in separate BO accounts, he said the clients will have to sell out their shares before they start trading through separate accounts.
Meanwhile, a top SEC official told the FE that they have asked both the DSE and the merchant bankers to settle the issue through discussion.
He also said it is also not possible to carry on trading by deducting a significant number of investors who trade through omnibus accounts.