Mohammad Mufazzal
The Central Counterparty Bangladesh Limited (CCBL) is yet to begin operations six years after its formation due to resistance from shareholder directors of the exchanges.
As per the existing system, the 10-member board of the CCBL consists of five independent directors, four representatives from the shareholding companies, including the exchanges and the Central Depository Bangladesh Limited (CDBL), and its managing director.
The representatives from the Dhaka and Chittagong bourses must also be independent directors of the companies, and the one from the CDBL is its managing director.
Officials of the Bangladesh Securities and Exchange Commission (BSEC) said the CCBL would not be able to start operations until it is registered with the BSEC, but to date its shareholders, including the Dhaka Stock Exchange and the Chittagong Stock Exchange, have not applied for the registration.
As per the exchanges' negotiation, the DSE holds 45 per cent shares of the CCBL, while the CSE holds 20 per cent. The remaining shares are divided among 26 banks with a 15 per cent stake, CCBL with a 10 per cent stake, and a strategic investor with a 10 per cent stake.
The board structure of the CCBL is not acceptable to shareholder directors of the exchanges, as they are not allowed to sit on the board of the CCBL under the current system, insiders said.
The CCBL, having a paid-up capital of Tk 3 billion, was formed in 2018 to facilitate quicker clearing and settlement of share transactions, which are presently executed by the exchanges themselves.
BSEC officials said the CCBL board structure had been designed to avoid the influence of the exchanges in line with the spirit of demutualization. However, the exchanges' shareholder directors might have an intention to be involved in the purchases required to set up the infrastructure of the CCBL.
Richard D Rozario, a shareholder director of the DSE, said they had an observation regarding the structure of the CCBL's board.
He said the board of the CCBL consists of independent directors nominated by the shareholding companies only. "It can't be. The shareholders have a right to oversee the activities of the CCBL."
Rozario also said a huge amount of purchase would be needed before the beginning of the operations of the CCBL. The exchange's representatives on the board, who are also independent directors, might not be able to purchase machinery at competitive prices.
Moreover, the exchanges' TREC (trading right entitlement certificate) holders will no longer avail of the free limit in trading after the CCBL starts operations.
Presently, brokers are obligated to deposit a margin to the relevant bourse if their transaction volume exceeds Tk 100 million.
TREC holders do not want the facility to go, and so they are not interested in the CCBL, insiders said. Shareholder directors of the exchanges are also TREC holders.
In December last year, the Dhaka bourse requested the CCBL to suspend its procurements.
In an immediate reaction, the CCBL said the exchange's request was legally invalid, but later it refrained from going forward with the procurement process.
On the role of the CCBL, BSEC spokesperson Md Abul Kalam said all stock exchanges across the world execute clearing and settlement through a separate company.
The establishment of a clearing company is very urgent to speed up settlement and for the introduction of new derivatives.
The main function of the CCBL is the clearing and settlement of transactions executed on the exchanges' platforms. As a central counterparty, it guarantees the execution of clearing and settlement without any failure.
This company will be able to trace investors' funds kept in their bank accounts. Hence, it will be able to implement restrictions on purchases in margin accounts.
The CCBL will also secure transactions of derivatives.
"So, the exchanges should apply for registration of the CCBL on an urgent basis," Kalam said.
Major General Md Wahid Uz Zaman is the incumbent chairman of the CCBL, while the other independent directors are Ms Sultana Afroz, r Md Mostafizur Rahaman, Dr Md Jamal Uddin, and Dr Muhammad Asif Hossain Khan.
The directors nominated by the shareholders are Major General Mohammad, Mohammed Ishaque Miah, Dr Mahmud Hassan, and Md Abdul Mutaleb.
mufazzal.fe@gmail.com
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