Addressing technology-driven demands of capital market digitisation
Sunday, 3 January 2010
Md. Zahirul Islam
WE are nowadays living in an outstandingly hi-tech as well as high-tech economic world order with significant changes occurring incessantly. Notwithstanding remaining even in an adolescent period still now, the capital market of Bangladesh has been playing a vital role in the country's economy which is one of the poorest ones in the world. Investors in the capital market are outnumbering almost all other investor groups day-to-day. With a view to acclimatising the capital market with the present-day demand for swiftness, the regulatory authorities like Dhaka and Chittagong Stock Exchanges and Securities & Exchange Commission (SEC) have, in contrast, been developing the whole securities trading system into electronic.
The electronic securities trading system does, however, run on three different but mutually relevant phases - e.g. (1) the online trading, (2) the electronic settlement, and (3) the depository, which refers to networking and electronic storage system respectively. At present, the trading of securities is succeeded online both at Dhaka and Chittagong Stock Exchanges. The electronic settlement system is maintained also online and it is performed by Central Depository Bangladesh Limited (CDBL), which works out as a "depository" or storage.
The trading of securities had once been reminiscent of auction or bid only at Dhaka Stock Exchange (DSE) before Chittagong Stock Exchange (CSE) went into operation. The prospective sellers used to offer a price and the buyers, on the other hand, responded to the offer when their demand for the respective securities met up the sellers' supply. Then securities meant share certificates that looked like academic certificates. Fraudulence or forgery was then a common issue. The stock market breakdown in 1996 happened to transpire not only for the shrewdness of a self-seeking gang consisting of big gamblers but also for the drawbacks of the then traditional trading and settlement system.
After the 1996 disintegration, the entire securities trading system was transubstantiated into electronic, so was most of the settlement procedure too through the "depository," excluding the securities of a few companies, which yet hold physical (i.e. paper) shares. Securities are now traded online through specific software (e.g. TESA at DSE) that discloses buyers in the left column in a descending order and sellers in the right column in an ascending order. Securities are traded at the point of matching of buyers' demand and sellers' supply. The relevant software also shores up the system of circuit-breaker and circuit-filter, automatic systems of reining in the price of securities. The earlier set-up circuit-breaker and circuit-filter do not allow the price of securities to cross over a certain level.
This is the electronic system, in which securities are now traded. This electronic system has eased the trading system and discontinued the erstwhile risk of forgery, on the one hand, and unveiled a new horizon of complicatedness, on the other, not only in the trading system but in the settlement and "depository" too. Now let us focus on the settlement and "depository" before we go through the above-stated digital intricacy.
At present, the sold securities are to be settled by T+0 day. That is, the relevant brokerage house ought to send the sold securities to the CDBL before it is closed down at the end of the trading day. The process of sending the sold securities to the CDBL is named "pay-in." If a brokerage house fails to provide the respective securities sold on a certain trading day, it may be declared "defaulter" and its trading may also be suspended hereafter until and unless the settlement is accomplished.
The process of "pay-in" has, however, a crying need for the extreme circumspection. Every brokerage house [or depository participant (DP) in the technical language of CDBL] has a unique code number, which is to be entered repeatedly in every "pay-in" entry. If a mistake happens sometimes in entering the broker ID, then the securities are inserted into another DP instead of the relevant clearing beneficiary owner's (BO) account, which acts for the clearing account of banks. In the process of "pay-in," the clearing BO account picks up all the securities sold on a certain trading day and then sends them to the CDBL through online.
In case of purchase of securities, the bought securities come into the above-stated clearing account on T+3 days (excluding holidays or non-trading days) for securities belonging to A, B, and N categories. Securities belonging to Z category take T+9 days (excluding holidays or non-trading days) in this case. After the purchased securities have come into the clearing account, these have to be inserted into the respective BO accounts. This process is named "pay-out." It is only after the execution of "pay-out" when the purchased securities become "matured" i.e. saleable. Otherwise, the "pay-in" process faces failure unless and until a particular share appears at the respective BO account.
This is the incumbent electronic settlement system, in which any securities can be neither purloined nor manipulated by any means! No process rather than "pay-in" and "pay-out" does, in fact, exist for transferring the ownership of securities. In this digital trading system, not only the investors but also the traders (i.e. authorised representatives of the stock exchanges) must be ensured of appearance of the relevant securities in the respective BO accounts before selling them. Exclusion of this, i.e. sale of immature securities, can cause "short sale" in the "pay-in" process.
Most brokerage houses or merchant banks cannot help changing the "trade cast" (i.e. client wise trading statement) and collecting the relevant securities from another BO account, when they face "short sale." Nonetheless, against the rules and regulations, it is remarkably inexorable at all!
What is "depository?": Suppose an electronic banking system that preserves securities instead of money! This system is maintained and performed online by a central database. In this electronic banking system, securities are preserved in specific BO accounts and no securities can, however, be fished out by any means other than the "pay-in" process, which, on the contrary, demands for being set up against appropriate "trade cast" (i.e. client-wise trading statement) emerging in the report of relevant stock exchanges. Such an electronic securities bank is termed "depository." Central Depository Bangladesh Limited (CDBL) is the official depository with legal status in the Bangladesh stock market.
The depository is connected to the relevant depository participants (DP) through wide area network (WAN). The network providers tend to provide two options in networking - direct and dial-up, which tend to remain alternative to each other. The depository is upheld by specifically customised software titled "Master" with appropriate backup from particular software named "Vedas." In every morning, the DP must download all the necessary files from the CDBL via the "Operator Console" element of the above-stated "Matser" before the trading of securities begins (11 a.m. at present). These necessary files, in general, include BO set-up report, scanned BO signatures, pay-in and pay-out reports of the previous day, incumbent CDBL status, i.e. list of matured (saleable) securities, of the BO accounts, daily CDBL charge, report of dematerialisation, initial public offering (IPO), bonus, and right shares etc., and so on.
Nowadays upon accomplishment of the draw/lottery of IPO, the relevant issuer companies credit securities to specific BO accounts of the winners through CDBL. The same happens to bonus and right shares, too. Bonus or right shares are directly credited to particular BO accounts after annual general meeting (AGM) or extra-ordinary general meeting (EGM). Dematerialisation is another significant issue of the depository.
The formerly issued physical (i.e. paper) shares of those issuer companies whose transactions are now belonging to the CDBL do not become saleable unless and until they are dematerialised. Dematerialisation refers to turning of these previously issued paper shares into electronic. For the purpose of dematerialisation, investors holding the formerly issued paper shares are required to submit the paper share certificates along with the filled in dematerialisation form to the relevant DP.
Electronic securities can even be locked-in through the depository, if necessary. If someone wants to borrow from a bank or financial institution against his/her securities in a certain DP, it is possible. In such circumstances, the DP can pledge the securities next to the appeal of that bank or financial institution on behalf of the securities holder. Such "pledged" securities can never be sold unless and until these are again turned free of pledging.
Trade vs. settlement: It is startling that there is no direct linkage between the trade and the post-trade settlement. Trading of securities takes place in the stock exchanges (DSE/CSE) online and post-trade settlement (pay-in and pay-out) is quite discretely upheld by the CDBL. Trading goes on against the client codes, which indicate the buyers and the sellers. Every client code remains against a unique BO number automatically provided by the CDBL at the time of BO set-up. That is all about BO account, which does not have any direct effects on trading and vice-versa.
In case of trading, the buy limit can be fixed in advance. For instance, someone having Tk. 0.1 million (1.0 lakh) only in his/her account can be limited to buy securities only by this amount. If any purchase order crosses over Tk. 0.1 million (1.0 lakh), it shall not be executed. In contrast, the sale of securities is somewhat different in nature. It cannot be reined in beforehand. That is, any sale order can be executed, even if the relevant securities are not available in the relative BO account! Unavailability of securities in the BO account is not a barrier in execution of a sale order! If any securities are sold - even erroneously - from a brokerage house or merchant bank, yet it must deliver the pertinent securities by the above-stated T+0 day. Failure to do so shall bring that very brokerage house or merchant bank the promulgation of being "defaulter."
When any sold securities are found unavailable in the relative BO account at the "pay-in" process, then the brokerage house or merchant bank has to arrange them from another BO account, which is unlawful. Only an affirmative linkage between the stock exchanges (DSE/CSE) and the CDBL can discontinue this unlawfulness. The trading software of DSE and CSE should be more renovated up to a confirmatory linkage with the CDBL. The trading should be systemised such way so that no sale orders can be executed unless and until the relevant securities remain available in the respective BO accounts in the CDBL.
The technical know-how: It is, therefore, obvious that the online trading as well as settlement of securities is, at present, a colossal arrangement that requires skilled workforce with appropriate technical know-how. Operation of the depository by non-professionals, i.e. non-tech personnel, may cause accident at any levels anytime. Information and communication technology (ICT) is, no doubt, the present-day key factor in the stock market. Brokerage houses or merchant banks have to rely on three phases of ICT - e.g. server operation, networking (both LAN and WAN), and internal software maintenance. All the things pertaining to ICT had better been handled as well as tackled by apposite personnel with technical know-how.
Non-tech personnel, notwithstanding provided on-the-job training on ICT, can hardly be supposed to perform properly in the above-stated technological arena. Several brokerage houses or merchant banks are often prone to want amateur workforce to accomplish the ICT-related tasks with a view to maximising their profits through minimising their operational expenditures. Because of operation of technical tasks by non-tech personnel, there is always a chaotic condition in these brokerage houses or merchant banks, where neither the investors nor the workers can feel comfortable.
Do the non-tech personnel have anything else at all other than just standing agape, when they happen to face any difficulties relating to server operation, networking failure, or in-house software disturbance? Although any non-tech personnel can act upon online trading or working with specific software just clerically after being provided on-the-job training, yet it is quite impossible for them to be familiar with the ins and outs of the networking system, which is fundamental of the present-day online trading and settlement.
The personnel involved in online trading and settlement must be embellished with keen knowledge in the ICT. At least, they should be properly mentored by someone with adequate ICT know-how. The stock exchanges (DSE and CSE) and the SEC must take the brokerage houses and merchant banks under strict coercion about operation of online trading and settlement by appropriate ICT personnel. In this sphere, the authorisation training should not be the only measure. No brokerage houses or merchant banks should be allowed to operate online trading and settlement or open new branches without sufficient ICT-skilled workforces. For, the interest of so many investors is involved here. Operation of online trading and settlement by non-professionals may hamper the investors' interest seriously.
Turnover, not run-over!: Among the non-bank financial institutions, organisations relating to the capital market - especially brokerage houses - may be conspicuous in profit margin! Their major earning source is brokerage commission that ordinarily ranges from 0.3% to even 0.6%+ charged on everyday turnover (buy and sell of securities). Further, they earn interest from margin loans provided to the clients. Thus, they cannot help emphasising on multiplication of turnover! Emphasis on turnover would, however, be a common entrepreneurial approach, unless they were often found frenzied of it even through overlooking the rules and regulations regarding the indispensable workforces and technical objects assigned from the stock exchanges or SEC.
Let us now conceive of the morning scene of a brokerage house running with workforce shortage. As soon as the house opens at 10 a.m., the investors start overcrowding, crying for their portfolio, ledger, or CDBL print-outs, insisting on getting buy limit, and so on. The traders (authorised representatives) cannot help remaining at their wit's end when they have to face such multipurpose demands of the investors. How can they operate trading, provide portfolio, ledger, or CDBL print-outs to the clients, getting buy limit, receive and deliver paper shares and money upon checking fund/share withdrawal requisition at the same time, unless they are supposed to have ten hands (!) like the Hindu goddess Durga?
Moreover, if any one of the connections with the stock exchanges (DSE/CSE) or CDBL happens to break down in any way, then not only the trading is interrupted but also those, who are then in-charge, are hardly to put up with the situation at the time of simultaneously digesting investors' slur and clamouring for the said connectivity. Then, they have to call DSE/CSE, CDBL, and WAN service provider one by one with a view to identifying where the problem is. In such circumstances, whilst their sufferings know no bounds even normally, then they are still pressurised to burgeon turnover! The dunderheaded (!) managements of some brokerage houses are, as if, reluctant to realise the inescapably clear-cut correlation between turnover and logistic support.
Regrettably, the stock exchanges (DSE/CSE) or the SEC have yet sermonised any mandatory guidelines regarding the operation of brokerage house or merchant bank, though accentuating only on investors' welfare. But such mandatory guidelines are a pre-requisite to protect even investors' interest. An obligatory workforce requirement ought to be set up for approval of a new brokerage house or merchant bank, or a new branch of existing one. There must be an ideal ratio between workstations and traders (e.g. 2:3 or 3:5, and so on). That is to say, the brokerage houses should be compelled to take standby traders all the time. DSE/CSE or SEC must be entitled to hold back the respective brokerage house running with workforce shortage.
The brokerage houses may even be entitled to decrease the per capita financial benefits to their traders, if they are so desperate in the policy of the highest output through the lowest input. But they must be enforced to abide by the said minimum workforce requirement. Some brokerage houses, in spite of taking up the workstations and traders in the ratio of 1:1 or sometimes even lesser (!), are found to wild of turnover! As though, whatever happens, they will increase their turnover in return of run-over of both their workers and investors! The capital market can never be structured, unless and until such run-over in quest of turnover of some brokerage houses breaks off.
A concluding remark: The capital market has, no doubt, been demonstrating its widening impact over the country's economy through large involvement of the people. Its digitalisation has facilitated its functioning on the one hand and churned out new-fangled difficulties, on the other. If the stock exchanges, the regulator, and the CDBL do not act properly on the needs for addressing the technology-driven demands of digitalisation, then not only the capital market but also the entire economy will be in jeopardy. Only adequate prudence, integrity, and foregoing of excessive craziness for earnings can keep this sensitive zone of the economy dependable.
The writer works with ICB Securities Trading Company Ltd and can be reached at e-mail: zahirulbd@yahoo.com
WE are nowadays living in an outstandingly hi-tech as well as high-tech economic world order with significant changes occurring incessantly. Notwithstanding remaining even in an adolescent period still now, the capital market of Bangladesh has been playing a vital role in the country's economy which is one of the poorest ones in the world. Investors in the capital market are outnumbering almost all other investor groups day-to-day. With a view to acclimatising the capital market with the present-day demand for swiftness, the regulatory authorities like Dhaka and Chittagong Stock Exchanges and Securities & Exchange Commission (SEC) have, in contrast, been developing the whole securities trading system into electronic.
The electronic securities trading system does, however, run on three different but mutually relevant phases - e.g. (1) the online trading, (2) the electronic settlement, and (3) the depository, which refers to networking and electronic storage system respectively. At present, the trading of securities is succeeded online both at Dhaka and Chittagong Stock Exchanges. The electronic settlement system is maintained also online and it is performed by Central Depository Bangladesh Limited (CDBL), which works out as a "depository" or storage.
The trading of securities had once been reminiscent of auction or bid only at Dhaka Stock Exchange (DSE) before Chittagong Stock Exchange (CSE) went into operation. The prospective sellers used to offer a price and the buyers, on the other hand, responded to the offer when their demand for the respective securities met up the sellers' supply. Then securities meant share certificates that looked like academic certificates. Fraudulence or forgery was then a common issue. The stock market breakdown in 1996 happened to transpire not only for the shrewdness of a self-seeking gang consisting of big gamblers but also for the drawbacks of the then traditional trading and settlement system.
After the 1996 disintegration, the entire securities trading system was transubstantiated into electronic, so was most of the settlement procedure too through the "depository," excluding the securities of a few companies, which yet hold physical (i.e. paper) shares. Securities are now traded online through specific software (e.g. TESA at DSE) that discloses buyers in the left column in a descending order and sellers in the right column in an ascending order. Securities are traded at the point of matching of buyers' demand and sellers' supply. The relevant software also shores up the system of circuit-breaker and circuit-filter, automatic systems of reining in the price of securities. The earlier set-up circuit-breaker and circuit-filter do not allow the price of securities to cross over a certain level.
This is the electronic system, in which securities are now traded. This electronic system has eased the trading system and discontinued the erstwhile risk of forgery, on the one hand, and unveiled a new horizon of complicatedness, on the other, not only in the trading system but in the settlement and "depository" too. Now let us focus on the settlement and "depository" before we go through the above-stated digital intricacy.
At present, the sold securities are to be settled by T+0 day. That is, the relevant brokerage house ought to send the sold securities to the CDBL before it is closed down at the end of the trading day. The process of sending the sold securities to the CDBL is named "pay-in." If a brokerage house fails to provide the respective securities sold on a certain trading day, it may be declared "defaulter" and its trading may also be suspended hereafter until and unless the settlement is accomplished.
The process of "pay-in" has, however, a crying need for the extreme circumspection. Every brokerage house [or depository participant (DP) in the technical language of CDBL] has a unique code number, which is to be entered repeatedly in every "pay-in" entry. If a mistake happens sometimes in entering the broker ID, then the securities are inserted into another DP instead of the relevant clearing beneficiary owner's (BO) account, which acts for the clearing account of banks. In the process of "pay-in," the clearing BO account picks up all the securities sold on a certain trading day and then sends them to the CDBL through online.
In case of purchase of securities, the bought securities come into the above-stated clearing account on T+3 days (excluding holidays or non-trading days) for securities belonging to A, B, and N categories. Securities belonging to Z category take T+9 days (excluding holidays or non-trading days) in this case. After the purchased securities have come into the clearing account, these have to be inserted into the respective BO accounts. This process is named "pay-out." It is only after the execution of "pay-out" when the purchased securities become "matured" i.e. saleable. Otherwise, the "pay-in" process faces failure unless and until a particular share appears at the respective BO account.
This is the incumbent electronic settlement system, in which any securities can be neither purloined nor manipulated by any means! No process rather than "pay-in" and "pay-out" does, in fact, exist for transferring the ownership of securities. In this digital trading system, not only the investors but also the traders (i.e. authorised representatives of the stock exchanges) must be ensured of appearance of the relevant securities in the respective BO accounts before selling them. Exclusion of this, i.e. sale of immature securities, can cause "short sale" in the "pay-in" process.
Most brokerage houses or merchant banks cannot help changing the "trade cast" (i.e. client wise trading statement) and collecting the relevant securities from another BO account, when they face "short sale." Nonetheless, against the rules and regulations, it is remarkably inexorable at all!
What is "depository?": Suppose an electronic banking system that preserves securities instead of money! This system is maintained and performed online by a central database. In this electronic banking system, securities are preserved in specific BO accounts and no securities can, however, be fished out by any means other than the "pay-in" process, which, on the contrary, demands for being set up against appropriate "trade cast" (i.e. client-wise trading statement) emerging in the report of relevant stock exchanges. Such an electronic securities bank is termed "depository." Central Depository Bangladesh Limited (CDBL) is the official depository with legal status in the Bangladesh stock market.
The depository is connected to the relevant depository participants (DP) through wide area network (WAN). The network providers tend to provide two options in networking - direct and dial-up, which tend to remain alternative to each other. The depository is upheld by specifically customised software titled "Master" with appropriate backup from particular software named "Vedas." In every morning, the DP must download all the necessary files from the CDBL via the "Operator Console" element of the above-stated "Matser" before the trading of securities begins (11 a.m. at present). These necessary files, in general, include BO set-up report, scanned BO signatures, pay-in and pay-out reports of the previous day, incumbent CDBL status, i.e. list of matured (saleable) securities, of the BO accounts, daily CDBL charge, report of dematerialisation, initial public offering (IPO), bonus, and right shares etc., and so on.
Nowadays upon accomplishment of the draw/lottery of IPO, the relevant issuer companies credit securities to specific BO accounts of the winners through CDBL. The same happens to bonus and right shares, too. Bonus or right shares are directly credited to particular BO accounts after annual general meeting (AGM) or extra-ordinary general meeting (EGM). Dematerialisation is another significant issue of the depository.
The formerly issued physical (i.e. paper) shares of those issuer companies whose transactions are now belonging to the CDBL do not become saleable unless and until they are dematerialised. Dematerialisation refers to turning of these previously issued paper shares into electronic. For the purpose of dematerialisation, investors holding the formerly issued paper shares are required to submit the paper share certificates along with the filled in dematerialisation form to the relevant DP.
Electronic securities can even be locked-in through the depository, if necessary. If someone wants to borrow from a bank or financial institution against his/her securities in a certain DP, it is possible. In such circumstances, the DP can pledge the securities next to the appeal of that bank or financial institution on behalf of the securities holder. Such "pledged" securities can never be sold unless and until these are again turned free of pledging.
Trade vs. settlement: It is startling that there is no direct linkage between the trade and the post-trade settlement. Trading of securities takes place in the stock exchanges (DSE/CSE) online and post-trade settlement (pay-in and pay-out) is quite discretely upheld by the CDBL. Trading goes on against the client codes, which indicate the buyers and the sellers. Every client code remains against a unique BO number automatically provided by the CDBL at the time of BO set-up. That is all about BO account, which does not have any direct effects on trading and vice-versa.
In case of trading, the buy limit can be fixed in advance. For instance, someone having Tk. 0.1 million (1.0 lakh) only in his/her account can be limited to buy securities only by this amount. If any purchase order crosses over Tk. 0.1 million (1.0 lakh), it shall not be executed. In contrast, the sale of securities is somewhat different in nature. It cannot be reined in beforehand. That is, any sale order can be executed, even if the relevant securities are not available in the relative BO account! Unavailability of securities in the BO account is not a barrier in execution of a sale order! If any securities are sold - even erroneously - from a brokerage house or merchant bank, yet it must deliver the pertinent securities by the above-stated T+0 day. Failure to do so shall bring that very brokerage house or merchant bank the promulgation of being "defaulter."
When any sold securities are found unavailable in the relative BO account at the "pay-in" process, then the brokerage house or merchant bank has to arrange them from another BO account, which is unlawful. Only an affirmative linkage between the stock exchanges (DSE/CSE) and the CDBL can discontinue this unlawfulness. The trading software of DSE and CSE should be more renovated up to a confirmatory linkage with the CDBL. The trading should be systemised such way so that no sale orders can be executed unless and until the relevant securities remain available in the respective BO accounts in the CDBL.
The technical know-how: It is, therefore, obvious that the online trading as well as settlement of securities is, at present, a colossal arrangement that requires skilled workforce with appropriate technical know-how. Operation of the depository by non-professionals, i.e. non-tech personnel, may cause accident at any levels anytime. Information and communication technology (ICT) is, no doubt, the present-day key factor in the stock market. Brokerage houses or merchant banks have to rely on three phases of ICT - e.g. server operation, networking (both LAN and WAN), and internal software maintenance. All the things pertaining to ICT had better been handled as well as tackled by apposite personnel with technical know-how.
Non-tech personnel, notwithstanding provided on-the-job training on ICT, can hardly be supposed to perform properly in the above-stated technological arena. Several brokerage houses or merchant banks are often prone to want amateur workforce to accomplish the ICT-related tasks with a view to maximising their profits through minimising their operational expenditures. Because of operation of technical tasks by non-tech personnel, there is always a chaotic condition in these brokerage houses or merchant banks, where neither the investors nor the workers can feel comfortable.
Do the non-tech personnel have anything else at all other than just standing agape, when they happen to face any difficulties relating to server operation, networking failure, or in-house software disturbance? Although any non-tech personnel can act upon online trading or working with specific software just clerically after being provided on-the-job training, yet it is quite impossible for them to be familiar with the ins and outs of the networking system, which is fundamental of the present-day online trading and settlement.
The personnel involved in online trading and settlement must be embellished with keen knowledge in the ICT. At least, they should be properly mentored by someone with adequate ICT know-how. The stock exchanges (DSE and CSE) and the SEC must take the brokerage houses and merchant banks under strict coercion about operation of online trading and settlement by appropriate ICT personnel. In this sphere, the authorisation training should not be the only measure. No brokerage houses or merchant banks should be allowed to operate online trading and settlement or open new branches without sufficient ICT-skilled workforces. For, the interest of so many investors is involved here. Operation of online trading and settlement by non-professionals may hamper the investors' interest seriously.
Turnover, not run-over!: Among the non-bank financial institutions, organisations relating to the capital market - especially brokerage houses - may be conspicuous in profit margin! Their major earning source is brokerage commission that ordinarily ranges from 0.3% to even 0.6%+ charged on everyday turnover (buy and sell of securities). Further, they earn interest from margin loans provided to the clients. Thus, they cannot help emphasising on multiplication of turnover! Emphasis on turnover would, however, be a common entrepreneurial approach, unless they were often found frenzied of it even through overlooking the rules and regulations regarding the indispensable workforces and technical objects assigned from the stock exchanges or SEC.
Let us now conceive of the morning scene of a brokerage house running with workforce shortage. As soon as the house opens at 10 a.m., the investors start overcrowding, crying for their portfolio, ledger, or CDBL print-outs, insisting on getting buy limit, and so on. The traders (authorised representatives) cannot help remaining at their wit's end when they have to face such multipurpose demands of the investors. How can they operate trading, provide portfolio, ledger, or CDBL print-outs to the clients, getting buy limit, receive and deliver paper shares and money upon checking fund/share withdrawal requisition at the same time, unless they are supposed to have ten hands (!) like the Hindu goddess Durga?
Moreover, if any one of the connections with the stock exchanges (DSE/CSE) or CDBL happens to break down in any way, then not only the trading is interrupted but also those, who are then in-charge, are hardly to put up with the situation at the time of simultaneously digesting investors' slur and clamouring for the said connectivity. Then, they have to call DSE/CSE, CDBL, and WAN service provider one by one with a view to identifying where the problem is. In such circumstances, whilst their sufferings know no bounds even normally, then they are still pressurised to burgeon turnover! The dunderheaded (!) managements of some brokerage houses are, as if, reluctant to realise the inescapably clear-cut correlation between turnover and logistic support.
Regrettably, the stock exchanges (DSE/CSE) or the SEC have yet sermonised any mandatory guidelines regarding the operation of brokerage house or merchant bank, though accentuating only on investors' welfare. But such mandatory guidelines are a pre-requisite to protect even investors' interest. An obligatory workforce requirement ought to be set up for approval of a new brokerage house or merchant bank, or a new branch of existing one. There must be an ideal ratio between workstations and traders (e.g. 2:3 or 3:5, and so on). That is to say, the brokerage houses should be compelled to take standby traders all the time. DSE/CSE or SEC must be entitled to hold back the respective brokerage house running with workforce shortage.
The brokerage houses may even be entitled to decrease the per capita financial benefits to their traders, if they are so desperate in the policy of the highest output through the lowest input. But they must be enforced to abide by the said minimum workforce requirement. Some brokerage houses, in spite of taking up the workstations and traders in the ratio of 1:1 or sometimes even lesser (!), are found to wild of turnover! As though, whatever happens, they will increase their turnover in return of run-over of both their workers and investors! The capital market can never be structured, unless and until such run-over in quest of turnover of some brokerage houses breaks off.
A concluding remark: The capital market has, no doubt, been demonstrating its widening impact over the country's economy through large involvement of the people. Its digitalisation has facilitated its functioning on the one hand and churned out new-fangled difficulties, on the other. If the stock exchanges, the regulator, and the CDBL do not act properly on the needs for addressing the technology-driven demands of digitalisation, then not only the capital market but also the entire economy will be in jeopardy. Only adequate prudence, integrity, and foregoing of excessive craziness for earnings can keep this sensitive zone of the economy dependable.
The writer works with ICB Securities Trading Company Ltd and can be reached at e-mail: zahirulbd@yahoo.com