SEC clarifies bourses' index calculation method

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FE Report
The Securities and Exchange Commission (SEC) clarified Tuesday the index calculation method followed by the country's two bourses.
The existing method followed by the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) in index calculation is not at odds with the International Organisation of Securities Commissions (IOSCO), said an SEC spokesman.
IOSCO is an international organisation that brings together regulators of the world's securities and futures markets.
"IOSCO does not mention from what day the index will be calculated after listing of a new issue. But the commission asked on January 5 last the bourses to calculate the index from the second day of listing of a new issue based on the closing price of the first trading," said Farhad Ahmed, executive director of the SEC.
"In our country's perspective, there is a wide gap between the initial public offering (IPO) price and the listing price. But in a developed country this gap is very marginal," he said dwelling on the SEC order to the bourses on January 5.
The decision was taken, as investors might be misguided watching the index's sharp rise on the debut day of a company, he said.
On May 28 last year, the commission said that the bourses must follow a standard index calculation method from September 1, 2009 with a view to reflecting the appropriate market position in the index.
"The SEC will look into whether the bourses violated the commission's decision or not in this connection," said Ahmed.
Refuting the allegation that the SEC overlooked the wrong index calculation method followed by the bourses, he said, "The SEC did not sit idle, as it issued several letters to the exchanges before and after Grameenphone made debut on November 16."
It has been clearly evident in the country's largest mobile phone operator Grameenphone's DSE debut that added alone more than 750 points.
Previously, the DSE adjusted index on the basis of weighted price of a debutant and the CSE did it based on the weighted average price of several trading days.