DSE pours cold water on uniform software move
Monday, 17 May 2010
Mohammad Mufazzal
Dhaka stock exchange has rejected the securities regulator's demand to install uniform software in its brokerages aimed at curbing market manipulation and ensuring accurate information on trading.
The Securities and Exchange Commission (SEC) issued the directive recently, asking the Dhaka and Chittagong stock exchanges to use common software platform in an effort to minimise the risk of online manipulation by brokerages.
The order comes after SEC probes have detected that influential brokerages regularly use member-investors' Benefeciary Owner's accounts to cover up financial crimes.
"The brokerage houses did it quite easily as they used software that caters to their need while at the same time it can easily hide information from the regulator," said an SEC official.
He said the SEC asked the country's two stock exchanges to set up uniform software that are easily accesible and provide error-free and BO-account specific daily information on trading.
But the DSE, the country's leading bourse with market capitalisation of around US$35 billion, poured cold water on the demand earlier this week, saying it was "illogical".
"There is no instance of uniform software being used for daily trading in any markets in the world," DSE president Shakil Rizvi told the FE.
"I don't think it's essential as the need for software varies from one brokerage to other. Rather, the SEC should seek some common information from the brokerages, which will help shed proper focus on the market," he said.
SEC officials said lack of uniform software sometimes creates confusion and hinders proper investigation into alleged financial crimes or manipulations in the market.
"The brokerages' reluctance to use common software means they are not willing to come under SEC's complete supervision," another official said.
"SEC inspections on suspected financial crimes have sometimes scuppered or delayed due to different software being used by brokerages. Sometimes, they transfered shares from one account to another, leaving the account holders in complete darkness," he said
"If the software is uniform, we can easily detect discrepancies and will have accurate information from all brokerages," he added.
The DSE president admitted that brokerages were "reluctant" to use uniform software. "They buy and use software in accordance to their requirements."
DSE has nearly 400 brokerages with investors numbering more than 2.5 million.
The SEC approved licenses to 36 DSE brokerage branches earlier this year, with conditions that the stock market would install uniform software in all its brokerage houses.
But the DSE has yet to carry out the order, said an SEC official.
President of Chittagong stock exchanage -- which is a fraction of DSE's size --, however, backed the SEC's latest directive.
"It's a very good move by the regulator. It's the need of the hour," CSE president Fakhor Uddin Ali Ahmed said.
"We are trying to develop a uniform software in association with the DSE. If the joint venture fails, the CSE will alone develop a common software for its members and brokerages," he said.
Dhaka stock exchange has rejected the securities regulator's demand to install uniform software in its brokerages aimed at curbing market manipulation and ensuring accurate information on trading.
The Securities and Exchange Commission (SEC) issued the directive recently, asking the Dhaka and Chittagong stock exchanges to use common software platform in an effort to minimise the risk of online manipulation by brokerages.
The order comes after SEC probes have detected that influential brokerages regularly use member-investors' Benefeciary Owner's accounts to cover up financial crimes.
"The brokerage houses did it quite easily as they used software that caters to their need while at the same time it can easily hide information from the regulator," said an SEC official.
He said the SEC asked the country's two stock exchanges to set up uniform software that are easily accesible and provide error-free and BO-account specific daily information on trading.
But the DSE, the country's leading bourse with market capitalisation of around US$35 billion, poured cold water on the demand earlier this week, saying it was "illogical".
"There is no instance of uniform software being used for daily trading in any markets in the world," DSE president Shakil Rizvi told the FE.
"I don't think it's essential as the need for software varies from one brokerage to other. Rather, the SEC should seek some common information from the brokerages, which will help shed proper focus on the market," he said.
SEC officials said lack of uniform software sometimes creates confusion and hinders proper investigation into alleged financial crimes or manipulations in the market.
"The brokerages' reluctance to use common software means they are not willing to come under SEC's complete supervision," another official said.
"SEC inspections on suspected financial crimes have sometimes scuppered or delayed due to different software being used by brokerages. Sometimes, they transfered shares from one account to another, leaving the account holders in complete darkness," he said
"If the software is uniform, we can easily detect discrepancies and will have accurate information from all brokerages," he added.
The DSE president admitted that brokerages were "reluctant" to use uniform software. "They buy and use software in accordance to their requirements."
DSE has nearly 400 brokerages with investors numbering more than 2.5 million.
The SEC approved licenses to 36 DSE brokerage branches earlier this year, with conditions that the stock market would install uniform software in all its brokerage houses.
But the DSE has yet to carry out the order, said an SEC official.
President of Chittagong stock exchanage -- which is a fraction of DSE's size --, however, backed the SEC's latest directive.
"It's a very good move by the regulator. It's the need of the hour," CSE president Fakhor Uddin Ali Ahmed said.
"We are trying to develop a uniform software in association with the DSE. If the joint venture fails, the CSE will alone develop a common software for its members and brokerages," he said.