The securities regulator has moved to remove IPO quota gradually to ensure equal participation of general and institutional investors as the market is better now after 2010-11 debacle.
As part of the move, the Bangladesh Securities and Exchange Commission (BSEC) has already scrapped 20 IPO (initial public offering) quotas allotted for small investors who were affected following the debacle.
"We have already introduced the process of allotting IPO shares on pro-rata basis instead of lottery. All quotas will be scrapped gradually to ensure equal participation from all types of investors," said Dr. Shaikh Shamsuddin Ahmed, a BSEC commissioner.
He said the main objective of scrapping the IPO quota is to reduce anomalies in the capital market.
Earlier, the securities regulator brought an amendment to public issue rules keeping 65 per cent quota for general investors in IPOs approved under both the fixed price and book building method.
In a recent meeting, the securities regulator has scrapped 20 IPO quotas earlier allotted for affected small investors.
The BSEC commissioner Mr. Ahmed said now the market is featuring a daily turnover of above Tk 20 billion and the market capitalisation has also crossed Tk 5.50 trillion.
"The IPO quota was offered for a long time taking into account the then market situation and investors were benefitted at this. We think now there is no need for such quota," said the BSEC commissioner, adding that the demand of such quota has also declined.
The commissioner said gradually the IPO quota system will be removed keeping the facility unchanged for mutual funds (MF) to facilitate the growth of this sector for a certain period.
"We think the MF sector should be facilitated considering its hidden prospect. So, this sector will be allowed to avail the facility," the BSEC commissioner added.
As per the existing rules, the MFs are allowed to avail 10 per cent quota in the IPOs.
The former finance minister AMA Muhith announced a stock market revitalisation package on March 4, 2012 and the package included the 20-per cent quota facility in IPOs for affected small investors.
Later, the tenure of availing the quota facility was extended nine times till June 30, 2021.
As per the latest BSEC decision, this 20 per cent quota will be merged with the quota of general investors.
So, there will be no quota for affected investors in the IPOs whose consent letters were issued after June 30, 2021, according to the BSEC officials.
Asked, the BSEC's spokesperson Mohammad Rezaul Karim said general investors raised the demand for expanding their IPO quota.