Maiden commodity exchange to get ‘visible shape’ as rules finalised

The Chittagong Stock Exchange (CSE) now has no bar to commence the operation of its Commodity Exchange (CX) as the securities regulator approved the regulations of the country's maiden CX.
The approval came on Tuesday at a meeting of the Bangladesh Securities and Exchange Commission (BSEC).
Although the port city bourse received the licence to operate its CX in October 2023, it has been unable to ensure logistics in the absence of regulations for CX operations. The listing of derivatives, issuance of licences to brokers and appointment of authorised representatives are not possible without approved regulations.
The CX's regulations also feature clearing & settlement criteria.
"It would take around one month to have a gazette on the regulations approved by the securities regulator. After the publication of the gazette notification, the country's maiden CX will get a visible shape," said CSE's Managing Director M Shaifur Rahman Mazumdar.
A commodity exchange enables the trading in future commodity contracts, where traders agree to buy or sell goods at a negotiated price on a predetermined date. The proposed CX will function as a subsidiary of the Chittagong bourse.
The CX will be a public limited company with a paid-up capital of Tk 4 billion and the board will be composed of 13 members, including chairman. The initial products will be gold, cotton and crude oil.
The minimum paid-up capital for each commodity broker, which will be required to get a licence from the regulator, will be Tk 100 million.
Like TREC (trading right entitlement of certificate) holders, commodity brokers will have to ensure compliance with risk-based capital adequacy.
In September 2021, the securities regulator allowed the CSE to go ahead with its proposal to establish CX.
In April 2022, the CSE appointed Multi Commodity Exchange of India Ltd (MCX) as a consultant to help frame rules and regulations for CX. The CSE invested $0.7 million for the consultancy, software and hardware platform.
At Tuesday's meeting, the securities regulator also decided that 25 per cent of the interest earned from funds in CCAs (consolidated customer account) will go into investors' protection fund (IPF).
The remaining 75 per cent will be utilised by the brokers.
The BSEC and stock brokers had been locked into a debate over the utilization of the interest income as the former sought public opinions on its proposal that 25 per cent of interest would be transferred to the IPF and the remaining 75 per cent would be spent on improving financial literacy of brokers' clients.
Stockbrokers strongly opposed the provision and decided to go to the court to remove barriers in the way of full utilisation of interest income by themselves.
BSEC spokesperson Md. Abul Kalam told the FE that the regulator took the decision in alignment with international practices and public opinions. The transfer of 25 per cent interest income to the IPF would help settle investors' claims.
The securities regulator at the meeting also left the responsibility of appointing independent directors to the boards of non-functional and weak companies and the companies in which directors do not hold 30 per cent joint stakes as required by the rules and regulations.
Mr Kalam said the BSEC made the decision to ensure transparency at the regulator's end.
There had been allegations that the BSEC appointed close allies to the boards of weak companies.
"The provision of appointing independent directors is included in the corporate governance code set for listed companies. Now, the companies themselves will have to follow the code."
At the meeting, the securities regulator also approved final drafts submitted by the taskforce on proposed amendments to the rules tied to the floating of IPOs and mutual funds.
BO account fees reduced
The BSEC has slashed annual fee of beneficiary owner's (BO) accounts to Tk 150 from existing Tk 450, considering the present market condition and demand from stakeholders and investors.
To trade in the secondary market and apply for primary shares, an investor has to open a BO account with the Central Depository Bangladesh (CDBL), through a depository participant, which is usually a stockbroker or a merchant bank.
The total number of BO accounts came down to 1.69 million as of Tuesday from 1.79 million a year ago, according to the CDBL that preserves electronic data of all individual and institutional investors.
Berger given permission to issue rights shares
The stock market regulator allowed Berger Paints Bangladesh to raise Tk 3.03 billion by issuing 2.73 million rights shares, aiming to increase the free float of the company to more than 10 per cent from 5 per cent at present.
As per the regulatory approval, Berger will issue shares at Tk 1,110 each, including Tk 1,100 as premium. The shares will be issued exclusively to general shareholders and its eligible employees.
Berger will issue one rights share against existing one share since its parent company J&N Investments will not subscribe to any rights shares.
Berger received an exemption from the stock market regulator regarding sponsor-director share subscription. The exemption was granted because the plan to increase free float in the market, as per the rules, would not have succeeded if rights shares had been issued to all shareholders, including sponsor-directors.
The proceeds from the rights issue will be utilised for financing a portion of the company's third factory at National Special Economic Zone at Mirsarai.
Berger has been investing for capacity expansion as well as diversification of products and businesses, particularly focusing on low environmental impact.
IDLC Investment is working as issue manager of the rights offer.

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