Yet-to-operational share settlement firm asked to halt inflated purchases

The Dhaka Stock Exchange (DSE) has urged Central Counterparty Bangladesh Limited (CCBL) – formed to manage share settlements and improve the payment system – to suspend its procurement activities for installing a data centre and software for the next six months.

On 10 December, DSE Chairman Mominul Islam made the request in a letter sent to CCBL Chairman Maj Gen (retd) Wahid-Uz Zaman, following concerns raised by shareholders of the country's premier bourse.

The DSE holds a 45% stake in CCBL, while the Chattogram Stock Exchange owns 20%, the Central Depository of Bangladesh holds another 20%, and 12 banks collectively own the remaining 15%.

On 3 December, representatives of the DSE Brokers Association of Bangladesh (DBA) expressed serious concerns during a meeting with the DSE board regarding the procurement practices and other activities of CCBL in recent years.

They urged the DSE to intervene immediately and conduct a fair review of past decisions. Until the review is completed, they recommended that all procurement processes at CCBL be suspended.

Later that day, the DSE board, along with DSE-nominated directors on the CCBL board and the DSE management, echoed similar concerns.

Mominul Islam told The Business Standard, "We feel that there is a lack of transparency in the activities of CCBL. Especially since the company has not yet started its operations after beginning its journey in 2019, which makes us suspicious about their ability.

"So, we will hold a meeting with CCBL. There, a committee will be formed to review all their activities. We will take further steps based on the report of that committee."

DBA President Saiful Islam said, "The budget they have set to purchase the equipment and software required to develop the settlement and clearing system is much higher than the current market price, which is very suspicious. Therefore, we have requested the DSE to look into the activities of CCBL."

Farhad Ahmed, managing director of CCBL, told TBS, "We will submit our opinion against the allegations in writing to the board. Beyond this, I will not make any public statement."

What DSE says

In its letter, the DSE raised concerns about several past procurement decisions by CCBL, suggesting that these may not have prioritized the country's best interests and could have exposed critical technology infrastructure to external vulnerabilities.

The letter noted that, as the DSE currently provides the settlement facility for the capital market, there was a significant opportunity to leverage shared infrastructure between the DSE and CCBL. 

However, no effective dialogue has occurred between the two institutions to explore such opportunities. Instead, it appears that these possibilities were deliberately overlooked in favour of inflated and unnecessary procurements, resulting in higher service costs.

The DSE also expressed concerns over the unusually long delay in CCBL's operational launch, raising questions about its capability and transparency. 

To date, there has been no interaction at the operational level between CCBL and its key stakeholders, such as stock exchanges, the CDBL, and brokerage houses, to ensure seamless data exchange between technology platforms.

According to the letter, the absence of such collaborative planning at the initial stages leaves the project vulnerable to delays, cost escalation, or even complete failure during implementation.

Additionally, the DSE pointed out irregularities in CCBL's sharing of quarterly and annual financial statements, which undermines governance standards and hinders the DSE's ability to monitor CCBL's state of affairs as its major shareholder.

Commenting on the situation, the DBA president said the delay in CCBL's commencement has prevented the DSE from launching new products to diversify its business, thereby impeding the development of the capital market.

The DSE also requested the CCBL chairman to urgently arrange a meeting to review the situation at the policy level, followed by the formation of a joint commission at the operational level.

At this stage, it would not be judicious to proceed with any major procurement activities by CCBL pending the submission of a position paper by the joint commission, the letter stated.