SME board begins bulk trading today to give a boost to daily turnover

The SME board of the Dhaka Stock Exchange (DSE) will begin block trading today to facilitate bulk share transactions one and a half years after the introducing of the platform.
The features of block trades on the SME board will be similar to the main board in line with the 1999 Dhaka Stock Exchange Automated Trading Regulations.
The block market is for bulk selling and buying executed on an automatic-matching-with-equal-quantity-and-market-price basis.
As per the regulation, the minimum market value for a bulk lot of a certain security shall be Tk. 0.5 million at the existing share price unless otherwise fixed by the board with the approval of the regulator.
Normally, trading on the block board is negotiated by stock brokers. Sellers put forward amounts and rates at which they would like to sell securities, and brokers deliver the information to interested buyers.
After the deal settlement, information about the block transaction is posted on the bourses.
For example, if an investor has decided to sell a bulk amount of shares, he will strike a deal with a buyer to purchase the shares at a negotiated price.
Later, the seller will place a sell order at the negotiated price during trading hours, and the buyer will place a buy order for the same amount of shares at the same price. Hence, the trade will be executed on the block board.
Saied Mahmud Zubayer, a deputy general manager of the DSE, said the benefit of block transactions is that trading can be executed at the lowest or highest price within the circuit breaker.
"The transaction fee on the block board is also half the fee charged in usual transactions," he said.
The trade fee in the main board is 0.025 per cent of transaction value, which is reduced to 0.0125 per cent in the block board when the trade volume amounts to Tk 5 million or above.
Mr Zubayer said bulk transactions are done in the block board instead of the main board to avert any negative impact on the market price of the company involved.
Small-cap companies are especially vulnerable to outsized effects on stock prices.
The companies listed on the SMS board are all small- and mid-cap.
For example, the number of outstanding shares of Wonderland Toys is 62 million and the company's paid-up capital is Tk 100 million.
If Thursday's market price of Tk 33.90 is considered for a block trade, the lowest number of shares to be transacted will be 14,749.
A total of 28,015 shares of Wonderland Toys changed hands in the open market on Thursday. If a bulk trade were executed of the minimum volume, it might have led to a significant price change of the stock on the board.
In many cases, the number of shares fixed for a bulk trade is a few times the minimum volume worth Tk 0.5 million. That is why bulk share trading is preferably done in the block market.
The daily turnover is likely to get a boost on the SME board through the introduction of block transaction, said Mr Zubayer.
In recent times, the SME board recorded daily turnovers of Tk 30 million-Tk 48 million.
Presently, there are three markets in the exchange's main board -- public market, spot market and block market.
Through the introduction of the block market, the DSE's SME board from now on will have three markets as the main board does.
Share trading on the SME platform started on September 30, 2021 creating an opportunity for small and medium enterprises (SMEs) to raise capital from the stock market, a move to help them reduce debt burden, enhance corporate profile, and create optimal value.
The platform came into being with the belief that many small companies have good business potential but are unable to reach their desired goals due to a lack of scope of raising funds.
Trading began on the DSE's SME board with just six companies. At present, the number of companies listed on the board is 13.
As per a regulatory directive, any investor having an investment of Tk 2 million in listed securities of the main board and registered with the electronic subscription system of the stock exchanges is considered eligible for trading on the SME board.
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