stock exchange 03

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The project on Stock Exchange is an attempt to study an overall primarymarket and secondary market of Bangladesh. It helped to know and studythe parameters opted by all the Stock Exchange and the companies who are

operating themselves under the rules and regulation of Stock Exchange. Theperformance of Stock Exchange has registered a significant upward in recenttimes.

Right from the beginning Stock Exchange attract every person as it hasbecome common to see car on road every day and being a student of B.B.A.we learnt a lot from this project and it would helped us a lot in making ourcareer.

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Introduction

A stock exchange is a regulated market which provides services for stock

brokers and traders to trade stocks, bonds, and other securities.The initial offering of stocks and bonds to investors is by definition done inthe primary market and subsequent trading is done in the secondary market.A stock exchange is often the most important component of a stock market.Supply and demand in stock markets are driven by various factors that, as inall free markets, affect the price of stocks (see stock valuation).

There is usually no compulsion to issue stock via the stock exchange itself,nor must stock be subsequently traded on the exchange. Such trading is saidto be off exchange or over-the-counter. This is the usual waythat derivatives and bonds are traded. Increasingly, stock exchanges are

part of a global market for securities.

According to Husband and Dockerary,

"Stock exchanges are privately organized markets which are used to

facilitate trading in securities."

Organized and regulated financial market where securities (bonds, notes,

shares) are bought and sold at prices governed by the forces of demand and

supply. Stock exchanges basically serve as (1) primary markets where

corporations, governments, municipalities, and other incorporated bodies

can raise capital by channeling savings of the investors into productiveventures; and (2) secondary markets where investors can sell their securities

to other investors for cash, thus reducing the risk of investment and

maintaining liquidity in the system. Stock exchanges impose stringent rules,

listing requirements, and statutory requirements that are binding on all listed

and trading parties. Trades in the older exchanges are conducted on the

floor (called the 'trading floor') of the exchange itself, by shouting orders and

instructions (called open outcry system). On modern exchanges, trades are

conducted over telephone or online. Almost all exchanges are 'auction

exchanges' where buyers enter competitive bids and sellers enter

competitive orders through a trading day.

The stock exchange is the important segment of its capital market. If the

stock exchange is well-regulated function smoothly, then it is an indicator of

healthy capital market. If the state of the stock exchange is good, the overall

capital market will grow and otherwise it can suffer a great set back which is

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http://en.wikipedia.org/wiki/Investorhttp://en.wikipedia.org/wiki/Primary_markethttp://en.wikipedia.org/wiki/Secondary_markethttp://en.wikipedia.org/wiki/Stock_markethttp://en.wikipedia.org/wiki/Free_markethttp://en.wikipedia.org/wiki/Stock_valuationhttp://en.wikipedia.org/wiki/Over-the-counter_(finance)http://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Investorhttp://en.wikipedia.org/wiki/Primary_markethttp://en.wikipedia.org/wiki/Secondary_markethttp://en.wikipedia.org/wiki/Stock_markethttp://en.wikipedia.org/wiki/Free_markethttp://en.wikipedia.org/wiki/Stock_valuationhttp://en.wikipedia.org/wiki/Over-the-counter_(finance)http://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Bond_(finance)


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not good for the country. The government at various stages controls the

stock market and the capitals market.

A capital market deals in financial assets, excluding coin and currency.

Banking accounts compromises the majority of financial assets. Pension and

provident funds insurance policies shares and securities.

Financial assets are claim of holders over issuer (business firms and

governments). They enter low different segment of financial market.

Those having short maturities that are non-transferable like bank savings

and current accounts set the identification of the monetary financial assets.

This market is known as money market, Equity, Preferential shares and

bonds and debentures issued by companies and securities issued by the

government constitute the financial assets, which are traded in the capital

market.

S - Securities provide for investor.

T - Tax Benefits planning and exemption.

O - Optimum return on investment.

C - Cautious Approach.

K - Knowledge of Market.

Ex - Exchange of Securities Transacted.

C - Cyclopedia of Listed Companies.

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H - High Yield.

A - Authentic Information

N - New Entrepreneur encouraged.

G - Guidance of Investor & Company.

E - Equity

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Chapter 2: Findings and Analysis

HISTORY OF STOCK EXCHANGE IN

BANGLADESH

Stock Exchange was established on 8 June, 1993 under the Securities and

Exchange Commission Act, 1993. The Chairman and Members of the

Commission are appointed by the government and have overall

responsibility to administer securities legislation. The Commission, at present

has three full time members, excluding the Chairman. The Commission is a

statutory body and attached to the Ministry of Finance.

STOCK EXCHANGES IN BANGLADESH

There are two stock exchanges in Bangladesh.

1. Dhaka Stock Exchange (DSE)

2. Chittagong Stock Exchange (CSE)

Dhaka Stock Exchange (DSE)

History:Dhaka Stock Exchange (Generally known as DSE) is the mainstock exchange of Bangladesh. It is located in Motijheel at the heart of the

Dhaka city. It was incorporated in 1954. Dhaka stock exchange is the first

stock exchange of the country. As of 18 August 2010, the Dhaka StockExchange had over 750 listed companies with a combined market

capitalization of $50.28 billion.

The necessity of establishing a stock exchange in the then East Pakistan was

first decided by the government when, early in 1952, it was learnt that the

Calcutta Stock Exchange had prohibited the transactions in Pakistani shares

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and securities. The provincial industrial advisory council soon thereafter set

up an organizing committee for the formation of a stock exchange in East

Pakistan. A decisive step was taken the second meeting of the organizing

committee held on the 13th march, 1953. In the cabinet room, Eden building,

under the chairmanship of Mr. A. Khaleeli, secretary government of East

Bengal, commerce, labor and industries department at which various aspects

of the issue were discussed in detail. Then the central governments proposal

regarding the Karachi Stock Exchange opening a branch at Dhaka did not

find favor with the meeting who felt that East Pakistan should have an

independent stock exchange. It was suggested that Dhaka Narayanganj

Chamber of Commerce & Industry should approach its members for

purchase of membership cards at RS.2000 each for the proposed stock

exchange. The location of the exchange it was thought should be Dhaka,

Narayanganj or Chittagong. An organizing committee was appointed

consisting of leading commercial and industrial personalities of the provincewith Mr. Mehdi Ispahani as the convener in order to organize the exchange.

It was also decided that membership fee was to be RS.2000 and subscription

rate at 15 per month. The exchange was to consist of not more than 150

members. A meeting of the promoters was held at the chamber on

03.09.1953 when it was decided to appoint Orr Dignam & Co., solicitors to

draw up the memorandum and articles of association of the stock exchange

based on the rules of stock exchange existing in other countries and taking

into account local conditions.

The 8 promoters incorporated the formation as the East Pakistan Stock

Exchange Association Ltd. on 28.04.1954. As public company, on 23.06.1962

the name was revised to East Pakistan Stock Exchange Ltd. Again on

14.05.1964 the name of East Pakistan Stock Exchange Limited was changed

to "Dhaka Stock Exchange Ltd."

At the time of incorporation the authorized capital of the exchange was RS.

300000 divided into 150 shares Of RS. 2000 each and by an extra ordinary

general meeting adopted at the extra ordinary general meeting held on

22.02.1964 the authorized capital of the exchange was increased to TK.500000 divided into 250 shares of TK. 2000 each. The paid up capital of the

exchange now stood at TK.460000 dividend into 230 shares of TK. 2000

each. However 35 shares out of 230 shares were issued at TK. 80, 00,000

only per share of TK. 2000 with a premium of TK. 79, 98,000.

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Although incorporated in 1954, the formal trading was started in 1956 at

Narayanganj after obtaining the certificates of commencement of business.

But in 1958 it was shifted to Dhaka and started functioning at the

Narayangonj Chamber Building in Motijheel C/A.

On 1.10.1957 the stock exchange purchase a land measuring 8.75 kattah at9F Motijheel C/A from the government and shifted the stock exchange to its

own location in 1959.

First incorporated as East Pakistan Stock Exchange Association Ltd in 28

April 1954 and started formal trading in 1956. It was renamed as East

Pakistan Stock Exchange Ltd in 23 June 1962. Again renamed as Dacca Stock

Exchange Ltd in 13 May 1964. After the liberation war in 1971 the trading

was discontinued for five years. In 1976 trading restarted in Bangladesh, on

16 September 1986 DSE was started.

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Legal Control:

The Dhaka Stock Exchange (DSE) is registered as a Public Limited Company

and its activities are regulated by its Articles of Association rules &

regulations and bye-laws along with the Securities and Exchange Ordinance -

1969, Companies Act - 1994 & Securities & Exchange Commission Act -

1993.

Formation:

Dhaka Stock Exchange (DSE) is a public limited company. It is formed and

managed under Company Act 1994, Security and Exchange Commission Act

1993, Security and Exchange Commission Regulation 1994, and Security

Exchange (Inside Trading) regulation 1994. The issued capital of thiscompany is Tk. 500,000 which is divided up to 250 shares each pricing Tk.

2000. No individual or firm can buy more than one share. According to stock

market rule only members can participate in the floor and can buy shares for

himself or his clients. At present it has 238 members. Market capitalization of

the Dhaka Stock Exchange reached nearly $9 billion in September 2007 and

$27.4 billion on Dec 9, 2009.

Management:

The management and operation of Dhaka Stock Exchange is entrusted on a

25 members Board of Director. Among them 12 are elected from DSE

members, another 12 are selected from different trade bodies and relevant

organizations. The CEO is the 25th ex-officio member of the board. The

following organizations are currently holding positions in DSE Board:

Bangladesh Bank

ICB

President of Institute of Chartered Accountants of Bangladesh

President of Federation of Bangladesh Chambers of Commerce and

Industries

President of Metropolitan Chambers of Commerce and Industries

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Professor of Finance Department of Dhaka University

President of DCCI (Dhaka Chamber of Commerce and Industry)

Chittagong Stock Exchange (CSE)

History:

The Chittagong Stock Exchange (CSE) began its journey in 10th October of

1995 from Chittagong City through the cry-out trading system with the

promise to create a state-of-the art bourse in the country.

Founder members of the proposed Chittagong Stock Exchange approached

the Bangladesh Government in January 1995 and obtained the permission of

the Securities and Exchange Commission on February 12, 1995 for

establishing the country's second stock exchange. The Exchange comprised

of twelve Board members, presided by Mr. Amir Khosru Mahmud Chowdhury

(MP) and run by an independent secretariat from the very first day of its

inception.

CSE was formally opened by then Hon'ble Prime Minister of Bangladesh onNovember 4, 1995.

Vision

Aspire a global standard transaction place of securities and financial product.

Mission

Practice a set of core values to build competency in compliance,

diversification and technology so that an accessible platform, market

confidence and wealth maximization scope can be ensured.

Core values

Value for people

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Transparency

Excellence

Harmony

Commitment

Integrity

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Timeline

1 April 1995 CSE incorporated as a company.

10 October Floor trading started in cry out system.

4 November 1995 formally opened by then former Prime Minister Begum

Khaleda Zia.

30 May 2004 Internet based Trading system opened.

Trading hours

Market opens at 11 am local time.

Market closes at 3 pm local time.

MANAGEMENT OF STOCK EXCHANGE

Management of stock exchange is done an elected body of members. These

bodies are known by different names in different stock exchange.

These governing bodies are powerful bodies enjoying extensive

administrative power of management and control over their respective stockexchange the day-to-day function of the stock exchanges are executed by

the sub-committee like the defaulters committee listing committee,

settlement committee etc.

The Objectives of the Stock Exchange

Stock exchanges consist of the physical spaces, materials, labor, expertise

and regulatory oversight allowing the issue, purchase and sale of common

stock. Common stock is the means by which publicly traded companies are

funded, owned and controlled. The financial services industry, including

brokerages and others that deal directly with stock exchanges, is a large

sector in its own right. The enormous growth in some industries would be

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impossible without their firms being organized as corporations and issuing

common stock.

Capital Formation

One of the most important objectives of a stock exchange is capitalformation. This refers to the accumulation of vast quantities of moneynecessary to start large ventures. Power plants, automobile productionfacilities, computer chip manufacturers and many other endeavors requiretens or hundreds of millions of dollars of investment before they can produceany profit. Without corporate organization, this accumulates capital (money)while dispersing ownership, many of these projects would not be possible.

Connecting Traders

The stock exchange also facilitates trading. One of the advantages ofcorporate organization is that stakeholders may sell their interest to anotherparty. At any one time, hundreds or even thousands of individuals may wishto sell their shares of stock, while as many investors may wish to purchasethe same security. Stock exchanges put in place the infrastructure necessaryto connect these buyers and sellers. Many stock exchanges occupy physicalbuildings in which traders, brokers and other agents of the system work.Other exchanges occupy no centralized physical location and operatethrough telecommunication and computer networks.

Security

The operators of stock exchanges, in cooperation with their governments,have designed and implemented laws and regulations determining how thesystem should function. These rules are intended to protect the investorfrom unfair advantages taken by people possessing special knowledge. Theyalso obligate people who have entered into contracts to honor thosecontracts or face criminal prosecution. The goal of regulation is to allowpeople who may not always trust each other to do business with each other,

because they trust the system.Some regulation is put in place to protect against unintended consequencesof an unregulated market. For example, the "uptick rule" states that before ashort contract (a "bet" that a stock will decline) can be written on a security,the price must increase, at least incrementally. This prevents a strugglingstock from being shorted, which can decrease confidence in its strength andlead to more shorting and a further decline.

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Economic Indicator

Though not originally intended to function as such, stock exchanges also

work as instruments to quantify the state of an economy. Even a casualobservation of the general trends on major stock exchanges can give someinsight into the state of a national or regional economy, or even the globaleconomy.

Increase business turnover

Modernize trading system

Ensure effective relationship management

Achieve high level of confidence &

professionalism

Engage in product and market diversification

Contribute to capital market policy

development

Ensure exchange related quality services

Functions of Stock ExchangeStock Exchange commission Established for the purpose of assisting,

regulating and controlling business of buying, selling and dealing in

securities.

Stock exchange provides a ready and continuous market for purchase

and sale of securities. It provides ready outlet for buying and selling of

securities. Stock exchange also acts as an outlet/counter for the sale of

listed securities.

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Stock exchange is useful for the evaluation of industrial securities. This

enables investors to know the true worth of their holdings at any time.

Comparison of companies in the same industry is possible through

stock exchange quotations (i.e. price list).

Stock exchange accelerates the process of capital formation. It creates

the habit of saving, investing and risk taking among the investing class

and converts their savings into profitable investment. It acts as an

instrument of capital formation. In addition, it also acts as a channel for

right (safe and profitable) investment.

Stock exchange provides safety, security and equity (justice) in

dealings as transactions are conducted as per well-defined rules and

regulations. The managing body of the exchange keeps control on the

members. Fraudulent practices are also checked effectively. Due to

various rules and regulations, stock exchange functions as the

custodian of funds of genuine investors.

Listed companies have to comply with rules and regulations of

concerned stock exchange and work under the vigilance (i.e.

supervision) of stock exchange authorities.

Stock exchange serves as a platform for marketing Government

securities. It enables government to raise public debt easily and

quickly.

Stock exchange provides a clearing house facility to members. It

settles the transactions among the members quickly and with ease.

The members have to pay or receive only the net dues (balance

amounts) because of the clearing house facility.

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Healthy speculation, keeps the exchange active. Normal speculation is

not dangerous but provides more business to the exchange. However,

excessive speculation is undesirable as it is dangerous to investors &

the growth of corporate sector.

Stock exchange indicates the state of health of companies and the

national economy. It acts as a barometer of the economic situation /

conditions.

Banks easily know the prices of quoted securities. They offer loans to

customers against corporate securities. This gives convenience to theowners of securities.

Prohibiting insider trading in securities.

Regulating the substantial acquisition of shares and take-over of

companies.

Undertaking investigation and inspection, inquiries and audit of any

issuer or dealer of securities, the Stock Exchanges and intermediaries

and any self-regulatory organization in the securities market.

Conducting research and publishing information.

Listing of Companies (As per Listing Regulations).

Providing the screen based automated trading of listed Securities.

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Settlement of trading (As per Settlement of Transaction Regulations).

Gifting of share / granting approval to the transaction/transfer of share

Outside the trading system of the exchange (As per Listing Regulations

42).

Market Administration & Control.

Market Surveillance.

Publication of Monthly Review.

Monitoring the activities of listed companies (As per Listing

Regulations).

Investors grievance Cell (Disposal of complaint bye laws 1997).

Investors Protection Fund (As per investor protection fund Regulations

1999).

Announcement of Price sensitive or other information about listed

companies through online.

STOCK TRADING

OVERVIEW

The marketing of the securities on the stock exchange can be done through

member of the stock exchange. These members can be either individuals or

corporate bodies.

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For the process of trading in stock exchange there is the basic need for a

transaction between an individual and the broker execute customers order

to buy or sell on the stock exchange trading ring. The exchange of scrip

between the member of the exchange in from of buying or selling is called

trading

Broker is the member of recognized stock exchange and helps the customers

in buying or selling the securities for the brokerage that he receives.

Trading Method

Listing securities are traded on the floor of recognized stock exchange where

its member traded. An investor is not permitted to enter the floor of stock

exchange and he has trust the broker to:

Negotiate the best price for the trade.

Settle the account, i.e. payment for securities sold on due date.

Take delivery of securities purchase.

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TYPES OF TRADING

Trading in stock exchange is conducted in two ways:

1) Ready delivery contract.

2) Forward delivery contract.

BASKET TRADING SYSTEM

The Basket Trading System provides the arbitrageurs an opportunity to take

advantage of price differences in the underlying Sensex and Futures on the

Sensex by simultaneous buying and selling of baskets comprising the Sensex

scraps in the Cash Segment and Sensex Futures. This is expected to provide

balancing impact on the prices in both cash and futures markets.

The Exchange has commenced trading in the Derivatives Segment with

effect from June 9, 2000 to enable the investors to, inter-alias, hedge their

risks. Initially, the facility of trading in the Derivatives Segment was confined

to Index Futures. Subsequently, the Exchange has introduced the Index

Options and Options & Futures in select individual stocks. The investors in

cash market had felt a need to limit their risk exposure in the market to

movement in Sensex.

To participate in this system, the member-brokers need to indicate numberof Sensex basket(s) to be bought or sold, where the value of one Sensex

basket is arrived at by the system by multiplying TK.50 to prevailing Sensex.

For e.g., if the Sensex is 4000, then value of one basket of Sensex would be

4000 x 50= i.e., TK. 2, 00,000/-. The investors can also place orders by

entering value of Sensex portfolio to be brought or sold with a minimum

value of TK. 50,000/- for each order.

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PROCEDURE OF TRADING

1. Select of broker

The first step is buying or selling of share is to select a broker for transaction

business on behalf of the investor. The trading of securities on the stock

exchange can be done through members of the exchange.

An investor prefers to select a broker who shall.

Act with due skill. Care and diligence in the conduct of all his

business.

Not create false market either singly or in concert with other.

2. Opening an Account with the Broker

The next step to open account with the broker. It helps the investor to

provide his credit worthiness, if the clients were not to do margin money with

the broker.

3. Selection of Securities

This is application for buying securities. The investor may be consulted with

broker and take advise for selection of securities.

4. Selection of Time for Trading

This is important to get the best advantage from buying or selling the

securities.

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5. Placing an Order

Various method of placing an order with the broker has been evolved to give

the broker leverage when he is on the floor of the stock exchange.

6. Preparation of Contract Note

SEBI circular of 4th Feb. 1991 requires that all member of the recognized

stock exchange issue contract note to the investors on the execution of

trade. Brokers, therefore issue contract note to the client, who gives the

name of the company, price of trade, brokerage, time of execution, provision

regarding arbitration etc. in term of the bye-laws of stock exchange, this is

statutory requirement and mandatory.

7. Settlement

The settlement is the process whereby payment is made by brokers who

have made purchase and share delivery by those brokers who have made

sales.

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Chapter 3: Conclusion

CONCLUSION

Companies come to the stock market in a variety of different ways and for a

variety of reasons. As a private investor, one can sometimes get an

allocation of newly-issued shares, but often the issue will be confined to

institutional investors. With internet shares, and the movement towards

direct online IPOs, this may change for the better. Most of the time one willbe trading in a company's ordinary shares on the secondary market.

Companies issue other types of share - notably preference shares,

convertibles, and warrants - and even if one doesnt own them they may

have an effect on their dividend entitlement if they dilute earnings. A scrip

issue is designed to improve marketability of ordinary shares, and does not

dilute ones ownership. A rights issue is designed to raise more money for the

company, and existing shareholders will be invited to buy first. One has a

choice about whether to exercise ones rights, but if one do not, their

ownership may be diluted.

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Chapter 4: Reference and

Bibliographyhttp://www.bbsbangladesh.com/index.jsf

www.dsebd.org/

www.bbsbangladesh.com/

iiitbd.org/ponno-binimoy-o-stock-exchange/

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http://www.bbsbangladesh.com/index.jsfhttp://www.dsebd.org/http://www.bbsbangladesh.com/index.jsfhttp://www.dsebd.org/

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