Stock Exchange organised market for trading of stocks and bonds. In early 1952, five years after the independence of Pakistan, the Calcutta Stock Exchange prohibited transactions in Pakistani stocks. This necessitated the formation of a stock exchange in East Pakistan and the East Pakistan Stock Exchange Association Ltd. was incorporated on 28 April 1954. It changed its name to East Pakistan Stock Exchange Ltd on 23 June 1962, and finally to Dhaka Stock Exchange (DSE) on 14 May 1964. Although incorporated in 1954, formal trading started in 1956 in Narayanganj. In 1958, the stock exchange was shifted to Narayanganj Chamber Building. DSE purchased its own land, and moved to its own premises at 9/F Motijheel C/A in 1959. Prior to independence in 1971, the number of listed companies in DSE was 196 with a total paid up capital of Tk 4 billion. The daily average transaction during that period was about 20,000 shares.

After the Independence, the government of Bangladesh took charge of the abandoned industrial units and pursued a policy, under which large industrial units were nationalised. The trading activities of DSE remained suspended till 1975 and following change in the economic policy of the government, DSE resumed its activities in 1976 with only 9 listed companies, having a total paid up capital of Tk 137.52 million. The actual growth of the stock exchange in Bangladesh (the DSE) started since 1983, when the market capitalisation was Tk 812 million. The year 1987 experienced a relatively steep rise in the market with 92 listed companies. With the liberalisation of policies in the 1990's the stock market gradually started to prosper. On 30 June 2001, the number of securities listed in the DSE was 244, the number of listed companies 224, number of listed debentures 10, number of shares of all listed companies 666,553 and that of all mutual funds 72,250 and the market capitalisation Tk 72,168 million ($1226 million).

Any individual of sound mind and over 21 years of age can apply to become a member of the stock exchange by purchasing a share of DSE and after obtaining dealer/broker license from the securities and exchange commission (SEC). Since the incorporation of DSE, a typical cry out system, where each security is generally called only once for a trading day was followed. This cry out system was abolished and a fully automated computerised system was installed on 10 August 1998. The trading is now in continuous session from 10:30 am to 2:30 pm. The session is divided in 5 parts: pre-opening session, opening session, continuous or regular trading session, closing session, and post-closing session. All transactions of brokers are settled and cleared through the 3rd and 5th working day respectively, calculated from the date of contract (hawla) and the procedure followed is presented in chart I.

Chart I 

The clearing house operates manually. Working hours of the clearing house are from 9:00am to 5:00pm. The Stock exchange remains open from Saturday to Thursday and remains closed on Friday.

The management of DSE is vested on a 24-member council having a chairman, one senior vice chairman and one vice chairman. Among the 24 council members, 12 are elected and nominated by DSE members. The other members are representatives from the Bangladesh Bank, finance ministry, law ministry and ministry of industries, presidents of the CA institute, FBCCI, MCCI, DCCI, Supreme Court Bar Association and bankers/insurance corporations associations and the chairman of the Department of Finance and Banking/Economics of the University of Dhaka. The operational management of the DSE is headed by a CEO, who works as an independent entity under the general policy framework set by the council.

The Securities and Exchange Commission approved formation of a second stock exchange at Chittagong in 1995. The Chittagong Stock Exchange (CSE), located at Agrabad, Chittagong has a policy making body of 18 members, 6 of whom are nominated by the SEC and 12 are elected by the general body. The board elects its own president and 3 vice presidents. Trading operations in CSE has been fully automated since June 1998. The number of listed company in CSE is 150 and their total paid up capital is $515.00 million.

Like in all other countries, the securities market in Bangladesh is linked with other financial institutions, many of which are directly linked for trading purposes at both the stock exchanges. These institutions include the scheduled banks, Investment Corporation of Bangladesh (ICB), merchant banks and investment institutions. Foreign banks also invest in IPO's.

The securities market in Bangladesh is guided by the Security Act 1920, the Securities Ordinance 1969, and the Securities and Exchange Commission Act 1993. The DSE and CSE have their own internal rules, and regulations such as the DSE Automated Trading Regulations 1999, Dhaka Stock Exchange Investors Protection Fund Regulation 1999, the Margin Rules 1999, and Settlement of Stock Exchange Transaction Rules 1998. [Ishtiaque Ahmed Khan]