Nuzhat Anwar The prime bourse's first female managing director has devised a plan to transform the secondary market by introducing AI-based surveillance, offering pre-listing support to SMEs, and expanding product offerings.
In her first-ever media interview with The Financial Express, Nuzhat Anwar, chief of the Dhaka Stock Exchange (DSE), set out her targets and the path she aims to follow to achieve them.
The market has long suffered from fraud, scams, and manipulation, leading to an erosion of investor trust. The DSE chief believes that deploying artificial intelligence could help combat such illegal activities.
She said the existing surveillance system depends on human resources. "As part of improving vigilance, the DSE will move towards AI-based surveillance that will instantly raise red flags in response to abnormal trading activities."
The prime bourse has also engaged with the securities regulator to remove obstacles to investigating brokerage firms so that it can intervene in their operations in time and prevent potential scams from developing.
It usually takes two to three weeks to obtain permission from the Bangladesh Securities and Exchange Commission (BSEC) to probe a stockbroker. Any sign of misconduct may trigger such a move. However, by the time approval comes, the broker may already have executed its conspiracy.
On bringing SMEs to the market, Ms Nuzhat said the market is not representative of the economy, which is largely made up of small and medium enterprises. She spoke to several SME companies and found that they are not interested in listing due to a lack of understanding of the market and insufficient funds to process listing applications.
In some cases, the cost of raising funds is too high for these entities. "That's why these companies need additional financial support and training." She has been striving to arrange grants from development organisations such as the World Bank and the Asian Development Bank to train SME entrepreneurs.
"I've already talked to two organisations to provide funds for SME companies that are expected to be ready for listing within two to three years," said Ms Nuzhat.
The DSE has also been working to strengthen its organisational capacity to support initial public offerings under the revised public issue rules, which came into effect in December last year.
As part of this effort, the bourse has already held several meetings with companies that are potential candidates for listing. It has also prepared a list of companies from different industries eligible for listing.
"Now is an ideal time for raising funds from the market amid monetary tightening in the banking sector," said the DSE chief.
Previously, companies had to wait for more than a year to receive approval for IPO proposals, which hindered the timely financing of intended projects. Due to such 'abnormal' delays in capital raising through IPOs, project costs would escalate.
"Now, a company's IPO seeking higher premiums will be accepted or rejected within 40 to 53 days," Ms Nuzhat said.
Under the revised IPO rules, the securities regulator will not approve IPOs without the exchange's observation.
"Our existing team is capable of handling four to five IPOs a month. In addition to improving organisational capacity, the exchange will employ more efficient manpower."
While new listings are a priority, the delisting of non-operational companies is also on the bourse's agenda, said the DSE chief.
Moreover, the DSE aims to increase foreign investment in the market, for which regulations and market operations must be streamlined.
"We need reclassification of the market from frontier to emerging status."
The DSE held a meeting with global index provider FTSE to understand how such reclassification can be achieved. It will sit with the securities regulator, the central bank, and the revenue board to address obstacles hindering this transition.
For example, if a foreign investor executes a trade in an 'A' category stock, the trading cycle is T+2 days. However, it takes almost eight to nine days for the funds to be repatriated.
These procedural complications need to be addressed. That is why, in forging a path to achieve its goals, the DSE requires support and cooperation from other regulatory bodies, said Ms Nuzhat, who has experience in leadership roles at global agencies, including the International Finance Corporation (IFC).
The DSE will seek support from the revenue board to address tax-related issues to enhance foreign investment in the capital market.
Based on suggestions from FTSE, the DSE will work to form a working committee comprising representatives from the central bank, the securities regulator, the revenue board, and other relevant authorities to communicate with the global index provider.
"Vietnam followed this model and achieved emerging status. We are at a nascent stage and need to complete many tasks for the sake of the market and the economy."
Ms Nuzhat said the working committee would be formed this month to supervise the changes needed for market reclassification.
Meanwhile, revenue generation is imperative for the bourse to survive amid a steep decline in profits over the past three years.
The DSE made a profit of Tk 1.24 billion in FY22, which fell to Tk 806 million in FY23, Tk 613 million in FY24, and Tk 312 million in FY25.
Amid this sustained decline in profits, the DSE has opted for an expensive matching engine worth Tk 2.9 billion from the US-based Nasdaq, considering future market expansion.
At the same time, it has begun exploring new avenues for revenue generation.
The DSE has already appealed to the securities regulator to allow trading in stocks on record dates and to introduce share netting.
"We also need to bring quality securities and new products to the market. Our five-year roadmap includes various cost-effective strategies to boost the exchange's profitability," said Ms Nuzhat.
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