Dhaka bourse to launch alternative trading board amid liquidity crunch

Infographic: TBS

The Dhaka Stock Exchange (DSE) will launch an alternative trading board (ATB) to facilitate share transactions of non-listed firms at a time when the country's stock market is going through a massive liquidity crunch amid a lack of investor confidence.

Professor Shibli Rubayat-Ul-Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), will inaugurate the trading board on 4 January at the country's premier bourse.

A DSE official said trading on ATB will start by offloading shares of LankaBangla Securities.

The BSEC chairman said the brokerage firm has to offload at least 10% of its stake within the first 30 days of its trading debut.

Giving reasons for preferring ATB, LankaBangla Securities Chief Executive Officer Khandoker Saffat Reza had earlier told TBS, "We do not need capital now. Instead, price discovery of our shares, and liquidity – the ease of buying and selling – are important for our existing shareholders."

According to market participants, ATB is being launched at a time when the stock market faces a slowdown. The BSEC has prevented the share price from falling by placing a floor price on the DSE's main trading platform. There is also a drought in transactions. Turnover on the Dhaka Stock Exchange's main market fell to a 30-month low on Monday, while the key index DSEX fell to a five-month low.

The Dhaka Stock Exchange launched its SME Board for small-cap companies on 30 September 2021. Although there was not much response in the beginning, later there was a lot of manipulation with the shares listed on this market. So the share price of a small company like Yousuf Flour Mills rose from Tk26 to around Tk3,000 in a short span of time. The regulatory body and stock exchanges are blamed for this.

In addition, two separate platforms for listing and trading of bonds and government treasury bonds were launched this year, but they are still not very popular.

Seeking anonymity, a top official of a brokerage firm said that there is a lack of good governance in the stock market. Also, there is a lack of investor confidence. In this situation, there is the question of how investors can be protected in risky places like non-listed companies.

BSEC spokesperson and Executive Director Rezaul Karim said, "ATB is risky for average investors. So, if anyone wants to buy shares of any company from this board, they must first conduct research on it."

Mentioning that security, liquidity, and growth are most important for investment, ‍a brokerage firm's top official said it is better not to encourage small investors to invest in ATB securities.

"The reason is that the amount of risk in debt and equity securities listed on the ATB is much higher than the securities listed on the main board. And because of the high investment risk on this board, only large investors should be encouraged to invest here," he added. 

The DSE additionally announced, "To be on the ATB, securities must be in dematerialised form." That means electronic units of ATB scrips must be within the central depository system managed by Central Depository Bangladesh Ltd.

The DSE also said that funds cannot be raised through an IPO from ATB, as in the main market. Here ownership can be changed only through buy-sale of shares or units.

The BSEC approved the Alternative Trading Board Rules 2019 at the end of 2019.