Strategic partner's stake row freezes CSE commodity exchange plan

The whole process of launching the country's maiden commodity exchange (CX) has come to a halt as the shareholding status of the strategic partner of the Chittagong Stock Exchange (CSE) has created complications.

Seven companies have already applied for licences to operate as commodity brokers at the CX to be launched by the CSE. They have completed the basic infrastructure needed for operations, and the CSE has sought regulatory approval for the commodities to be traded at the CX.

However, the Bangladesh Securities and Exchange Commission (BSEC) has to overcome a legal barrier before making any progress.Bangladesh travel guide

As per the rules set for the CX, the exchange's strategic partner is not allowed to hold more than 25 per cent shares of the exchange.

ABG Ltd., a company of Bashundhara Group, became the CSE's strategic partner by purchasing 25 per cent shares of the exchange. It also owns a brokerage firm - Stock & Brokerage Linkway - with a 0.51 per cent stake in the port city bourse.

As a result, the shareholding of the CSE's strategic partner has exceeded the stipulated ownership ceiling.

"The regulator will not issue approvals or licences until the complications over the strategic partner's stake are resolved," said CSE Managing Director M. Shaifur Rahman Mazumdar.

To break the deadlock, Bashundhara Group will have to surrender the ownership of the brokerage firm to another party.

Mr Rahman said the conglomerate is ready to transfer the additional shares, but the National Board of Revenue (NBR) has stopped the transfer of its assets. "That's why the whole matter of the commodity exchange is hanging."

After the fall of the Awami League-led regime, the NBR in October 2024 requested the Department of Joint Stock Companies and Firms to suspend share transfers by seven groups, including Bashundhara, to prevent tax evasion. Since then, Bashundhara's share transfers have remained suspended.

BSEC spokesperson Md. Abul Kalam said the regulatory body was working to facilitate the introduction of the commodity exchange.

"The securities regulator is still very positive about the CX. But compliance is a must. That's why the regulator has asked the CSE to resolve concerns over the shareholding status of the strategic partner," he said.

The companies that have applied for broker licences are LankaBangla Securities, BR Rich, Sohel Securities, Island Securities, Royal Capital, UCB Stock Brokerage, and NLI Securities.

They have been operating on both the Dhaka and Chittagong stock exchanges.

Similar to TREC (Trading Right Entitlement Certificate) holders of the bourses, a company will require a broker licence from the securities regulator to conduct trading at the CX.

As per the rules, the minimum paid-up capital of a commodity broker will be Tk 100 million.

Apart from brokerage firms, other companies can also become commodity brokers by fulfilling the requirements.

Chief Executive Officer (CEO) of LankaBangla Securities Khandoker Saffat Reza said their basic infrastructure for commodity trading was ready.

Some 12 authorised representatives of LankaBangla have been trained by the CSE in commodity broking.

"Initially, the CSE will provide us with back-office and order management software. We are kind of ready for the CX," Mr Reza said.

The BSEC spokesperson said the regulator was checking whether the companies seeking licences complied with the regulatory conditions. The BSEC has also been examining whether the CSE's infrastructure is ready to run a commodity exchange.

A CX is a legal entity that determines and enforces rules and procedures for trading in standardised commodity contracts and related investment products.

Such a platform enables the trading of futures commodity contracts, where traders agree to buy or sell goods at a negotiated price on a predetermined date. The proposed CX will function as an extension of the port city bourse.

The commodities primarily decided to be traded at the CX are gold, cotton, and crude oil.

mufazzal.fe@gmail.com