What to expect and what not from Alternative Trading Board

The Dhaka Stock Exchange (DSE) on Wednesday launched its Alternative Trading Board to offer a secondary marketplace of unlisted or delisted shares, bonds, and collective investment fund units, which have long been too cumbersome for investors to be bought or sold in the private arena.

The over-the-counter (OTC) extension of the stock exchange's main platform is being highly lauded by foreign private equity investors home and abroad, startups and alternative investment funds as both their entry and exit barriers should ease a lot.

The alternative trading board market does not let any company raise capital from the public, said M Shaifur Rahman Mazumdar, acting managing director of the DSE. 

Instead, the firms that do not want or yet to be ready for equity capital from the public would get the taste of a public company, their sponsors, directors, or private equity investors would enjoy a liquid market for an exit, while their counterparts, ideally with similar sophisticated profiles, would enjoy the entry ease, he added.

The platform is expected to emerge as a good matchmaker of deals currently being taken place beyond public domains as share transfer expense would be halved in the alternative trading board from what investors and entrepreneurs are spending right now, he continued.

Aspiring firms with growth potential, which are looking for private equity can attract relevant investors' eyes through the easier and low-cost listing into the new OTC that does not require any case-to-case approval of the Bangladesh Securities and Exchange Commission (BSEC), instead, the bourse will decide to list or reject.

Also, the firms on the alternative trading board have been waived from preparing quarterly financial statements, the robust management structure outlined in the Corporate Governance Code for the sake of making their lives in the bourses easy.

However, audited annual reports, timely disclosure of price-sensitive information, and shareholders' annual general meetings are a must.

LankaBangla Securities, a top-tier brokerage firm, entered the alternative trading board as the first company, while a bond also accompanied many more in the pipeline.

The developments and all the positive expectations come at a time when the Bangladesh capital market is suffering a serious confidence crisis due to unconventional regulatory measures, primary market frauds, and too many manipulations loosely addressed by the regulators.

By nature, loosely regulated OTC markets, also called pink board or alternative board across the world, have a long history of witnessing hoaxes, pump and dump play by fraudsters, and the unsophisticated retail investors are the victims of those. 

In recent years, developed markets have raised their OTC governance to a remarkable level, that is visible to be better than that in the main boards of many frontier markets like Bangladesh.

Should retail investors hope a lot from the DSE alternative trading board? Most experts urged caution on part of investors as their experience from the tightly regulated main market is not sweet enough.

Raising public money in fraudulent ways, depriving them over years and alluring small investors in manipulative secondary market plays are too common stories in the DSE main board. 

BSEC Executive Director and Spokesperson Rezaul Karim said the alternative trading board regulations only waived things that would be hard to afford for the unlisted firms, but the annual reporting, authentic and complete price sensitive information are mandatory for them too.

Also, the DSE and BSEC surveillance of the secondary market trading of the ATB scrips would be there so that no manipulator can hurt investors' interest, he added.

Capital gains in ATB if realized before three months of entry, would not be enjoyed by investors, instead would go to the bourse's investor protection fund.

The effectiveness of the platform would depend on communicating the concept and benefits of ATB while proper and objective enforcement of regulations would be the key to investors' confidence and protection, said DSE's Mazumdar.

Dr AB Mirza Azizul Islam, former BSEC chairman and the economic adviser to the former caretaker government, said the new platform would facilitate many good things and both the DSE and BSEC should strengthen their supervision to avoid any fraudulence or manipulation.

Also investors should not expect the ATB firms as stable and consistent as the blue chip ones, said an investment banker.

Dr Islam said, investors should always be cautious being it in the main market or in the OTC.

BSEC's Rezaul Karim too said retail investors should hold additional caution in the alternative trading board.