SEC amends OTC market rules to woo unlisted cos
Tuesday, 27 April 2010
Kayes M Sohel
Securities regulator has amended 'over the counter (OTC)' rules, allowing unlisted companies with minimum paid up capital of Tk 50 million and also electronic shares to trade.
OTC market is a separate trading floor provided by a stock exchange to facilitate trading of unlisted and de-listed companies. Unlisted security means scrips issued by a public limited company but not listed with any exchange under the listing regulations.
Listing of the United Commercial Bank (UCBL) with OTC, a dematerialised share, has prompted the commission to allow electronic shares to trade in the new trading floor introduced by the Dhaka Stock Exchange six months back.
Under the amended rules, the paid up capital criteria has been increased from Tk 10 million to Tk 50 million for an unlisted public limited company willing to be listed with OTC market.
"The Securities and Exchange Commission (SEC) introduced relevant regulations governing the OTC market," said Mansur Alam, a member of the commission. The amended rules will make the OTC market effective and help protect the investor's interest, he said.
Back in March, the SEC had asked the bourses to make a guideline on transferring junk shares from the electronic board to OTC market, as there were no necessary guidelines to run it.
Presently, shares of 51 companies de-listed from DSE are being traded in the OTC market. Since introduction in October last year, a total of 142 selling orders were placed. Of which 43 orders were executed.
In 2001, the SEC endorsed rules for introducing OTC market at the bourses for the de-listed companies. Under the rules the Chittagong Stock Exchange (CSE) introduced the OTC market in 2004. But since introduction, not a single share was traded in CSE.
An OTC market official said, the investors lost their interest in stocks traded under OTC market as they considered those risky. "Besides, they are confused whether the OTC stocks could be re-sold or not," he said.
"OTC market will increase integration between Dhaka market and other international capital markets, most of which have separate OTC market," chairman Md Ziaul Haque Khondker said earlier.
Dispelling doubt over the OTC market's successes, he said, "I believe, transparency and efficiency will yield positive results."
But some market analysts termed the move as a ploy to let the rogue companies go off the hook instead of disciplining them.
"It means some companies will get listed with the capital market, make some money and leave the scene," an analyst said.
Salahuddin Ahmed Khan, professor of the finance department at Dhaka University, said, "OTC market will encourage companies to come to the market, raise money and get out of the market."
OTC market and the stock market cannot go together, he said adding the bourses should ensure accountability from the listed companies first.
Securities regulator has amended 'over the counter (OTC)' rules, allowing unlisted companies with minimum paid up capital of Tk 50 million and also electronic shares to trade.
OTC market is a separate trading floor provided by a stock exchange to facilitate trading of unlisted and de-listed companies. Unlisted security means scrips issued by a public limited company but not listed with any exchange under the listing regulations.
Listing of the United Commercial Bank (UCBL) with OTC, a dematerialised share, has prompted the commission to allow electronic shares to trade in the new trading floor introduced by the Dhaka Stock Exchange six months back.
Under the amended rules, the paid up capital criteria has been increased from Tk 10 million to Tk 50 million for an unlisted public limited company willing to be listed with OTC market.
"The Securities and Exchange Commission (SEC) introduced relevant regulations governing the OTC market," said Mansur Alam, a member of the commission. The amended rules will make the OTC market effective and help protect the investor's interest, he said.
Back in March, the SEC had asked the bourses to make a guideline on transferring junk shares from the electronic board to OTC market, as there were no necessary guidelines to run it.
Presently, shares of 51 companies de-listed from DSE are being traded in the OTC market. Since introduction in October last year, a total of 142 selling orders were placed. Of which 43 orders were executed.
In 2001, the SEC endorsed rules for introducing OTC market at the bourses for the de-listed companies. Under the rules the Chittagong Stock Exchange (CSE) introduced the OTC market in 2004. But since introduction, not a single share was traded in CSE.
An OTC market official said, the investors lost their interest in stocks traded under OTC market as they considered those risky. "Besides, they are confused whether the OTC stocks could be re-sold or not," he said.
"OTC market will increase integration between Dhaka market and other international capital markets, most of which have separate OTC market," chairman Md Ziaul Haque Khondker said earlier.
Dispelling doubt over the OTC market's successes, he said, "I believe, transparency and efficiency will yield positive results."
But some market analysts termed the move as a ploy to let the rogue companies go off the hook instead of disciplining them.
"It means some companies will get listed with the capital market, make some money and leave the scene," an analyst said.
Salahuddin Ahmed Khan, professor of the finance department at Dhaka University, said, "OTC market will encourage companies to come to the market, raise money and get out of the market."
OTC market and the stock market cannot go together, he said adding the bourses should ensure accountability from the listed companies first.