DSE eyes separate co to run CDS
Wednesday, 8 August 2007
Raihan M Chowdhury and Refayet Ullah Mirdha
The Dhaka Stock Exchange (DSE) is planning to set up a separate company to operate the Central Depository System (CDS) to ensure uninterrupted CDS operation.
The DSE move, if successful, will pose a threat to the existing Central Depository Bangladesh Ltd (CDBL), which began operation in early 2004.
"We submitted a proposal on establishing the new CDS company to the Securities and Exchange Commission (SEC) Tuesday, " DSE chief executive officer Salahuddin Ahmed Khan told the FE.
He said, if the SEC allows, it will take six months for setting up the new CDS company at a cost of Tk 100 million (10 crore) only after importing all required software and hardware.
He said 40 per cent shares of the proposed company will be owned by the DSE and the Chittagong Stock Exchange (CSE), 30 per cent by the financial institutions and the remaining 30 per cent by the general investors.
"We are hopeful that the company will be profitable as the number of listed companies is increasing," he said.
Market operators said the necessity of establishment of a new CDS company was felt very strongly in the backdrop of frequent disruptions suffered by the CDBL in recent times.
"The total system of the CDBL might collapse anytime if the capacity is not enhanced and the disruptions on August 1 and July 26 last are only a tip of the iceberg," a DSE Depository Participant (DP) source said.
The operation of the CDBL remained suspended for the entire day due to technical faults on July 26 last and spot trading of seven top companies on the Dhaka bourse was halted for almost all the trading hours on August 1 due to a similar disruption in the CDBL operation.
The suspension of the CDBL operation for the whole day was the first ever incident experienced since the CDS was introduced on January 24 of 2004, sources concerned said.
The source said it is very ridiculous that the stock market expects large companies like GrameenPhone to float shares, when the capacity of the existing CDS operating company is not at all adequate to run the system.
"We pay much more to the CDBL but get very little service from the company," a DSE DP source said.
The DSE has asked the CDBL authorities several times to enhance its capacity further.
CDS is aimed at expediting the share settlement procedure as well as ensuring smooth trading.
It also facilitates on-time corporate actions like electronic distribution of bonus shares, elimination of hassle relating to manual share registration and transfer, avoidance of rigorous process of certificate validation and averting all associated counter-productive trading activities.
He said although the number of shares on the DSE has increased over the last few years, the capacity of the CDBL has remained unchanged at the same stage.
Salahuddin Ahmed Khan said more than 93 per cent trading of DSE came under the CDBL.
DSE sources said the capacity of the CDBL has comparatively declined as the number of shares as well as transactions in terms of value and volume have grown gradually.
In 2004, the number of shares on the DSE was around 1.0 billion (100 crore) and this year the number has stood at 2.0 billion, the DSE sources cited.
When contacted, a CDBL source said when the CDS was introduced in early 2004, the market size was very little with a daily average turnover of Tk 200 million to Tk 300 million.
But, he said, now the daily average turnover has crossed Tk 1.0 billion and the transaction volume has also gone up.
Besides, the number of listed companies also grew in the last two-three years and for these reasons the CDBL often faces technical glitches during the share transaction settlement, he said.
The Dhaka Stock Exchange (DSE) is planning to set up a separate company to operate the Central Depository System (CDS) to ensure uninterrupted CDS operation.
The DSE move, if successful, will pose a threat to the existing Central Depository Bangladesh Ltd (CDBL), which began operation in early 2004.
"We submitted a proposal on establishing the new CDS company to the Securities and Exchange Commission (SEC) Tuesday, " DSE chief executive officer Salahuddin Ahmed Khan told the FE.
He said, if the SEC allows, it will take six months for setting up the new CDS company at a cost of Tk 100 million (10 crore) only after importing all required software and hardware.
He said 40 per cent shares of the proposed company will be owned by the DSE and the Chittagong Stock Exchange (CSE), 30 per cent by the financial institutions and the remaining 30 per cent by the general investors.
"We are hopeful that the company will be profitable as the number of listed companies is increasing," he said.
Market operators said the necessity of establishment of a new CDS company was felt very strongly in the backdrop of frequent disruptions suffered by the CDBL in recent times.
"The total system of the CDBL might collapse anytime if the capacity is not enhanced and the disruptions on August 1 and July 26 last are only a tip of the iceberg," a DSE Depository Participant (DP) source said.
The operation of the CDBL remained suspended for the entire day due to technical faults on July 26 last and spot trading of seven top companies on the Dhaka bourse was halted for almost all the trading hours on August 1 due to a similar disruption in the CDBL operation.
The suspension of the CDBL operation for the whole day was the first ever incident experienced since the CDS was introduced on January 24 of 2004, sources concerned said.
The source said it is very ridiculous that the stock market expects large companies like GrameenPhone to float shares, when the capacity of the existing CDS operating company is not at all adequate to run the system.
"We pay much more to the CDBL but get very little service from the company," a DSE DP source said.
The DSE has asked the CDBL authorities several times to enhance its capacity further.
CDS is aimed at expediting the share settlement procedure as well as ensuring smooth trading.
It also facilitates on-time corporate actions like electronic distribution of bonus shares, elimination of hassle relating to manual share registration and transfer, avoidance of rigorous process of certificate validation and averting all associated counter-productive trading activities.
He said although the number of shares on the DSE has increased over the last few years, the capacity of the CDBL has remained unchanged at the same stage.
Salahuddin Ahmed Khan said more than 93 per cent trading of DSE came under the CDBL.
DSE sources said the capacity of the CDBL has comparatively declined as the number of shares as well as transactions in terms of value and volume have grown gradually.
In 2004, the number of shares on the DSE was around 1.0 billion (100 crore) and this year the number has stood at 2.0 billion, the DSE sources cited.
When contacted, a CDBL source said when the CDS was introduced in early 2004, the market size was very little with a daily average turnover of Tk 200 million to Tk 300 million.
But, he said, now the daily average turnover has crossed Tk 1.0 billion and the transaction volume has also gone up.
Besides, the number of listed companies also grew in the last two-three years and for these reasons the CDBL often faces technical glitches during the share transaction settlement, he said.