Dhaka bourse maintains silence on mandatory self-listing

While all market stakeholders have been clamouring for listing of fundamentally-strong companies to invigorate the equity market, the mandatory self-listing of the Dhaka bourse has conspicuously remained absent from the conversation.

The listing of the exchanges is mandatory as part of the demutualisation scheme implemented in 2013 to separate their management and ownership for better market regulation.

It has already been more than a decade since the passing of the demutualisation act but both the bourses are yet to see any progress in the divestment of their shares to general and institutional investors.

The Chittagong Stock Exchange (CSE), however, recently submitted a proposal to the securities regulator for its listing on the prime bourse.

The act does not specify any timeframe for the equity offloading and so it is left to the exchanges' boards to decide.

At the time of the demutualisation, there was an expectation that the bourses would submit proposals to the Bangladesh Securities and Exchange Commission (BSEC) after three years regarding the share offloading.

"Definitely, it's a failure of the DSE's previous boards, especially independent directors who held the majority on the boards," said Minhaz Mannan Emon, one of the shareholder-directors of the Dhaka bourse.

He said the shareholder-directors could not prevent listing of the DSE if independent directors really pushed for it.
Also, the previous commissions of the securities regulator had imposed many decisions, exercising the sweeping power conferred by the special section 2CC of the Securities and Exchange Ordinance 1969. "But they didn't issue any order, forcing the exchanges to list," added Mr Emon.

As per the demutualisation act, 40 per cent shares of the Dhaka bourse were credited to the members; these shares have been blocked by the DSE.

Of the remaining 60 per cent shares, 25 per cent were sold to two Chinese strategic partners and 35 per cent are supposed to be issued to general and institutional investors, through which the exchange will be listed.

Earlier in December 2021, the securities regulator asked the exchanges to plan for listing. At that time, the regulator decided to conduct a special audit to assess the exchanges' preparedness for listing.

The then commission also asked the DSE to complete the listing procedure by 2022.

Preferring anonymity, a senior DSE official said the bourse had submitted an application, seeking guidelines from the BSEC on self-listing. He could not recall details but said no significant action had been taken to address the matter.

The CSE, meanwhile, has been awaiting approval of the BSEC in response to its recent listing proposal.

Refusing to comment on what has been done or has not been done, BSEC spokesperson Md. Abul Kalam said, "Now it's the appropriate time for the DSE's listing".

The equity market has shown signs of recovery, with increased participation of investors. Being a renowned and fundamental company, the DSE can sell shares at a good price, said Mr Kalam.

The DSE will not issue new shares. It will offload existing 35 per cent shares and this share transfer will have to be executed through direct listing.

DSE Director Emon's view, however, contradicts Kalam's.

According to him, the current situation of the equity market is not conducive to listing. The exchange's shareholders will not be interested in offloading shares, fearing that they would not get a good price as the exchange's operating income has drastically declined.

"The DSE is now surviving on interest income," said Mr Emon, adding that the DSE would be listed following stability in the equity market.

The DSE's main income is derived from transaction fees and the fees collected from listed securities.

Amid the bearish outlook, transaction fees fell to Tk 749 million in FY24 from Tk 1.25 billion in FY21.

Mazeda Khatun, managing director of ICB Capital Management that works as an issue manager, said the entities of the capital market were supposed to be listed but only the state-run Investment Corporation of Bangladesh (ICB) had listed on the stock exchanges.

In May this year, the DSE Brokers Association (DBA) urged the government to take necessary measures for the listing of the Central Depository Bangladesh Ltd. (CDBL).

"At the very least, a strategic plan for the DSE's listing should have been in place by now," said Mazeda, also president of the Bangladesh Merchant Bankers Association.

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