Dhaka bourse bets on Nasdaq tech to modernise trading

Amid gloomy revenue generation, the Dhaka bourse has decided to purchase expensive matching engines from Nasdaq in a bid to take the market to the next level.
Besides, the technology currently in place will expire in December next year. Hence, the prime bourse has opted for an "upgraded" version of trading software to ready the market for diversified products in the future.
The deal with US-based Nasdaq will cost the Dhaka Stock Exchange (DSE) Tk 2.9 billion, covering relevant technology and services for a period of 10 years.
The bourse had a cheaper offer from Pakistan-based Info Tech Private Ltd, but the DSE's board of directors preferred Nasdaq's matching engine, considering its reputation and experience. The fact that the existing technology was from the same vendor was also taken into account.
A matching engine facilitates trading by matching a buy order with a seller's price and quantity. The DSE allows brokers to connect their own Order Management Systems (OMS) via API (Application Programming Interface) to the exchange's engine.
The technology still in use at the Dhaka bourse has already been declared 'obsolete', said DSE Managing Director Nuzhat Anwar, adding that Nasdaq has introduced an upgraded version of its matching engine.
Meanwhile, the bourse has long been experiencing an erosion in profits. The DSE made a profit of Tk 1.24 billion in FY22, which declined to Tk 806 million in FY23, Tk 613 million in FY24, and Tk 312 million in FY25.
Before reaching a consensus to purchase a matching engine from Nasdaq, the DSE management assessed the comparative costs of products offered by several global vendors.
The pros and cons of the products on offer were explained to the exchange's shareholders on March 8, Ms Nuzhat said. A majority of the shareholders preferred the matching engine offered by Nasdaq despite its higher cost compared to other vendors.
Upon completion of further due diligence, the proposal to ink a deal with Nasdaq was placed at the board meeting on March 15, and the board unanimously approved it, she said.
Why is Nasdaq chosen?
The DSE has been paying around Tk 130 million per year for the existing software. Apart from Nasdaq, Millennium IT of London, Shenzhen Stock Exchange (SZSE) of China, and Info Tech Private Ltd. of Pakistan also provide similar trading software. However, Millennium IT and Shenzhen Stock Exchange will not be able to provide a matching engine within the next two years.
In contrast, Nasdaq can provide the technological support within the next nine months. It would not have been possible to install the matching engines of other vendors within the remaining period of the existing engine after completing the relevant processes.
"Also, the reputation and experience of Nasdaq were taken into account to choose its product over others," said the DSE's managing director.
The DSE could have fixed a deal at Tk 1.6 billion with Pakistan's Info Tech Private Ltd. The exchange will make an extra payment of Tk 1.3 billion to avail of trading software from Nasdaq.
The DSE chief explained that the payment will be made in phases over a period of 10 years, and so the additional payment for the technology and services will be reduced to Tk 720 million if the devaluation of the taka is considered.
The new software will go live in June next year, said Ms Nuzhat.
The DSE will need advanced trading technology to fulfil one of the requirements set for the elevation of the market from frontier to emerging status.
Industry insiders said the exchange's decision to procure a matching engine from Nasdaq will play a supportive role in market reclassification.
According to the website of Nasdaq, its matching engine provides comprehensive coverage for all asset classes - from equities, futures and options, bonds, foreign exchange, and commodities to exotic derivatives and digital assets.
"A wide range of market models and order types support order- and quote-driven markets as well as request for quote, auctions, multi-parameter matching, complex trading strategies, and trade reporting," the vendor said.

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