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INTRODUCTION
Stock market is an essential part of capital market. The economy of our country largely depends on a strong capital market. Contribution of any stock exchange generally leads to economic growth by increasing the funds to finance industry and other enterprise. Stock exchange is an independent company formed by shareholders members. It can take various decisions independently. The objective of stock exchange is to provide a market place along with facilities for together the buyers and sellers of securities promote just and equitable principles of trade protect the interest of the investors. A complete automation project of Chittagong stock exchange is on full swing. Considering the important the role of Chittagong stock exchange in development of capital market of Bangladesh, an attempt, has been in this terms paper to study the contemporary practices of stock trading in Chittagong stock market.

RATIONALITY OF THE STUDY

Where the rationality is the answer is prominently dominant in the why we make research? The easiest are as follows: 1. Make enable the students to realize the practical field of research. 2. Help to pursue the study in better way.
3. To understand and realize where management practices.

4. To complete in the job sector in vigorously. 5. To deserve the international recognition.

6. To fulfill the condition required by the BBA program.

OBJECTIVE OF THE STUDY

The main and foremost objective of this study is to be acquainted with the operational activities followed by Chittagong operational activities followed by Chittagong Stock Exchange (CSE). To achieve the main objective, the present study covers the following specific objectives: To identify the services rendered by CSE. To identify the goal and objectives of the organization To know the performance of CSE To review the operational system of CSE To identify the problem of stock exchange and To recommended some remedial measures to solve the problems.

METHODOLOGY OF THE STUDY

The present study is a part of academic curriculum. The collected data and information have been tabulated, processed and analyzed carefully. It has been prepared in present from to make the study more informative and useful. The study period has been made only by fifteen days. I tried my best to be acquainted with all the sections and departments of this organization. The information of the term paper has been collected through primary and secondary sources. Most of the data have been collected from secondary sources. The primary data had been collected by direct interviews and discussions all the secondary information helps a lot. The secondary information is collected from various books, financial papers, document articles related with the capital market, stock exchange, and security & exchange commissions etc. All secondary information also collected from library.

SECURITIES AND EXCHANGES COMMISSION (SEC)

The securities & exchange commission of Bangladesh was established on 8th June 1993. SEC is an autonomous body. It is the central regulatory agency which acting as watch dog to protect the interest of interest of investors in stocks and securities, developing and regulating the securities market. Its main function is to cover entire capital market including the establishment of fair trading practices and close supervision of listed companies, markets and playing the role as policy making and oversight body.

OBJECTIVES OF SEC
To control the financial institutions. To regulate the capital market To protect the interest of investors in securities To develop the securities market Ensuring proper issuance of securities and compliance of law relating to securities.

FUNCTIONS OF SEC
SEC mainly undertakes the following activities Regulating the stock and securities market
Registering regulating the business of stock-brokers, sub-brokers, shares

transfers agents, bankers and managers to the issues, register to an issue, investment advisors and other intermediaries in the securities market. Registering, monitoring and regulating of collective investment schemes including all forms of mutual funds Promoting monitoring and regulating all authorized self-regulatory organizations in the securities market. Prohibiting unfair trade practices relating to securities. Regulating substantial acquisition of shares or stock and take over of companies. Compiling, analyzing and publishing indices on the financial performance of any issuer of securities.

Conducting research and publish information for the above purpose.

STOCK MARKET:
The stock market is one kind of capital market where the stocks of the different companies are traded. This is well known as stock exchange, is a secondary market- a trading market. It is structured to provide liquidity & marketability to the securities industry. It is a worldwide system designed to bring buyers & sellers together.

TYPES OF STOCK MARKET:

There are two types of stock market:

Primary market- The primary market is that market in which the companies issue their shares. The primary market helps a firm to form their capital by selling their securities. Its serves as the conduct for funds from the investors to the firms. The primary market is a market of new issue. In this the share issuing companies sell their shares to the public through the underwriters. Once the shares traded the functions of the primary, market comes to an end. In this market there is no existence of the brokers. Secondary market In this market the brokers play an important role. There is no interference of the underwriters in this market. In this market, the shares, which are issued in the primary market, are traded through the brokers. An example of this sort of market is the organize stock exchange like Dhaka Stock Exchange & Chittagong Stock Exchange. The shares issuing firm doesnt get any direct benefit from this market. But it helps to determine the probable price of the new issue and its demand to investors. The functions of the market are controlled and regulated by the security exchange commission which guided by security and exchange commission Act 1993.

IMPORTANCE OF EXISTENCE OF AN EFFICIENT STOCK MARKET:

Stock market is an essential part of capital market. The economy of a country largely depends on a strong capital market. Contribution of any stock exchange generally leads to economic growth by increasing the funds to finance industry & other enterprises. Stock exchange is an independent company formed by shareholders & members. It can take various decisions independently. The objectives of stock exchange is to provide a market place along with facilities for bringing together the buyers & sellers of securities, promote just share & equitable principles of trade product the interest of the investors.

STOCK MARKET HISTORY IN BANGLADESH: A BRIEF DISCUSSION

DSE & CSE: as we know two stock exchanges are in operation in our countryDhaka stock exchange- DSE & Chittagong Stock Exchange CSE. The first stock market in this region was incorporated on 28th April 1954 with an authorized share capital of TK. 5-lakh only & paid-up capital of TK. 3.90 lakh only. At that time, it was East Pakistan stock exchange association limited. Thereafter on 20th June 1962 it was renamed as East Pakistan stock exchange limited. After 2 years, the name of this bourse has further been changed to Dhaka stock exchange limited. In the year1971, there were 196 listed securities in DSE. The trading activities of DSE were suspended between independence war & massive nationalization of all industries, banks & insurance companies till 1975; however, activities were resumed once again in 1976 by the government with changed economic outlook. At that time, only 9 companies were listed with market capital of TK. 14.76 lakh. At present, the number of listed companies in DSE is 224. After four decades of establishment of DSE, Chittagong stock
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exchange was established in the year 1995 with 30 listed companies. At present, the number of listed companies in CSE is 183. SEC: the central regulatory agency, Securities & Exchange Commission SEC is a body acting as watchdog to protect the interest of investors in stocks & securities, developing & regulating the securities market & ensuring proper issuance of securities & compliance of the relevant laws, besides performing wide range of functions covering the entire capital market including the establishment of fair trading practices & the close supervision of listed companies, markets, intermediate & playing the role as policy making & oversight body. SEC of Bangladesh was established on 8th June 1993. It commenced its full-scale activities after final inauguration on 14th November 1993.

CHITTAGONG STOCK EXCHANGE- A BRIEF DISCUSSION HISTORICAL BACKGROUND OF THE CSE:

The Chittagong Stock Exchange (CSE) is a non profit making organization. It was incorporated on 1st April 1995 as a limited company by guarantee. After six month, on 10th October 1995 floor trading was started with open cry- out auction system. In the backdrop of a strong need to institute a dynamic automated and transparent stock exchange in the country, seventy reputed business personalities under the leadership of Mr. Amir Khosru Mahmud Chowdhury MP, the founder president established this bourse in the commercial capital Chittagong. Only 30 securities were listed on the first day trade when market capitalization stood at US$ 0.2 Billion. Now CSE is a completely automated exchange with screen based trading facility on countrywide communication network. The Chittagong stock exchange will create an effective, efficient and transparent market of international standard to save and invest in Bangladesh in

order to facilitate the entrepreneurs to raise capital and accelerate industrial growth for overall benefit of the economy.

OBJECTIVES OF CSE
To develop a strong platform for the entrepreneurs for raising capital. To provide an investment opportunities for small and large-scale investors. To provide a transparent market ensuring investors interest. To provide a fully automated trading, clearing and settlement system to ensure quick, easy accurate and easy accessible to all transactions. To attract non-resident of country to invest in Bangladesh Stock market. To develop a corporate culture through mandatory corporate membership. To develop a research cell for analyzing status of the market and economy.

FUNCTIONS OF VARIOUS DEPARTMENTS OF CSE

Checklist of clearing & settlement A) To collect following CCS reports for every Department on T+1 day of the trading day: a) central net securities statement (C-1) b) central net amount statement (SE 5503) c) inter region scrip receipt/delivery summary (SE-4008) d) inter region scrip receipt/delivery summary (SE-4005) B) To download following RCS reports for every trading day from RCS work station placed in the Settlement Department on T+1 day, i.e. the next day of the trading day: a) buyer local securities receivable sheet (M-6) b) inter region scrip delivery statement c) inter region scrip receipt statement d) local net off amount statement
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trading from IT

e) local net of amount statement(MO) f) local net securities statement

g) Sellers local securities delivery sheet (M-8).

1. On the clearing day (T+3), receive securities & cheque as per sellers local securities deliverable sheet & central MO respectively, 2. Check the following on each delivering Member/Brokers bill while depositing shares: 3. Compare the followings on the certified with the above notes: 4. Check the following for each of the script/allotment letter: 5. Checklist for verifying cheque received: Following things to be ensured by concerned executives at the time of receiving cheque from member: 6. Preserve IT copy for data entry. 7. To store/file all bills & distribution sheets after completion of receiving securities. 8. Before delivery, all securities must be checked internally with buyer local securities receivable sheet to avoid /minimize risk. 9. Buying-in:a) To check sellers local securities deliverable sheets who fails to deliver shares partially or fully within 4.30 p.m. on the clearing day (T+3). 10. Selling out: a) to check local MO & prepare a list for the member fails to make payment by cheque/pay order within 4.00 p.m. of the clearing day (T+3) If a cheque issued by a member is dishonored / uncased by their bank CSE shall automatically square up the unsettled transactions by selling out of that defaulter members shares. 11. If any member fails to make payment & /or deliver securities within the paying T+3 say more than once in any calendar month of English era, CSE shall

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inform SEC in writing details of such default cases immediately after closure of the settlement time determined by CSE for the pay in day. 20. Specimen signature card: Preserve specimen signature of authorized signatories of the listed company for both the Share certificate Transfer deed Preserve sample copy of share certificates of different companies for comparison if needed. 21. Replacement of defective securities: Action: Defaulting member shall be bared from carrying on trading in CSE from the eight-market day till to the replacement or refunds are cleared. Flow chart for securities receiving & delivery (T+3 to T+5) ON T+3 day
Receiving counter EX-1 EX-2 EX-3

PRE VAULT SECTION

*(INTER REGIONAL SHARES ONLY)
REGIONAL SECTION

Objective: Further Scrutiny

*(INTER REGIONAL SHARES ONLY) VAULT PLACED IN DHAKA OFFICE

Sylhet/ Ctg.
(Before Delivery On T+4 Day)
REGIONAL INCOMING SECTION

On T+4 day, on receipt of regional shares (ctg. + sylhet) all shares both inter regional & intra regional should be checked /compared physically with buyer wise distribution sheet

Ctg Sylhet

Inter regional shares will arrive through courier on T+4 day

(On T+5 Day)

DELIVERY SECTION

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AR-1

AR-2

AR-3

AR-4

Legend: EX: Executive, AR: Authorized Representatives

4. The Listing Regulations: Short title and extent of applicability: (1) These Regulations may be called the Listing Regulations of the CSE

Settlement of stock exchange transaction regulations1998 of CSE

1. Short Title- these regulations may be called the Settlement of Stock Exchange Transactions Regulations, 1998. 2. Definitions- In these regulations, unless the context otherwise requires: CSE means Chittagong Stock Exchange Ltd. Clearing House means the facilities provided by CSE for completion of transactions through receipts and deliveries of securities and /or cheques /pay orders /demand drafts. Contract means a contract of transaction executed between the Buying Member and the selling member in the trading system of CSE. Trading day means the specific day on which transactions are carried out by the members in CSE (i.e. (T+ 0). Settlement Day means the day on which transactions that were carried out by the Members on a trading day arte settled by them through delivery of securities and/or cheques/pay orders /demand draft to the Clearing House of CSE and which shall be the third day subsequent to the Trading day i.e. T+3 for A and B category companies and the fourth day subsequent to the trading day, i.e. For Z category companies. f) If any settlement or clearance day falls on any holiday, the next day subsequent to the holiday shall be the settlement or clearance day.

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Explanations: In this regulation, holiday means a day, which is so declared by CSE. g) Member means Member of CSE who are registered as the Stockbrokers/dealers by the securities & Exchange Commission under the securities and Exchange Commission (stock-Brokers, stock-Dealers and Authorized Representative) Regulations, 1994. 3) Contract Note 4) Position for Settlement

Category of Companies
A - Category companies. Companies, which are regular in holding the current annual general meetings and have declared dividend at the rate of ten percent of more in the last English calendar year. B - category companies Companies which are regular in holding the annual general meetings but have failed to declared dividend at least at the rate of tem percent in the last English calendar year. Z- Category companies Companies which failed to hold the current annual general meetings or have failed to declare any dividend or which are not in operation for more than six months or whose accumulated loss after adjustment of revenue reserve, if any, is negative and exceeded its paid-up capital. 5. Security Deposit: Every Member Company shall keep such amount of money as security deposit with CSE as determined by CSE from time to time to meet any exigency. 6. Settlement by delivery of Securities and payment by cheque/pay order/demand draft by member: Every member shall deliver the securities and

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make payment by an account payee cheque/pay order demand draft payable at the bank of CSE to the Clearing House on the settlement day. Provided however that such settlement by member may also be made through the Regional Clearing House of CSE, if so declared by CSE, as opted beforehand by the members and agreed by CSE. 7. Automatic buying in and selling out- (i) If a member fails to deliver securities and /or make payment by cheque/ pay order/ demand draft within the settlement day, CSE shall automatically square-up the unsettled transaction by buying in or selling out as the case may be, in CSE after the day subsequent to the settlement day on the risk and account of the defaulting member, without any further reference. CSE shall inform the defaulting member as to the difference money, if any, for payment immediately after buying in or selling- out by CSE. (ii) If a cheque issued by a member is dishonored by his / its bank, CSE shall automatically square up the unsettle transaction by selling out his securities in CSE after dishonor of the cheque on the risk and account of the defaulting member without any further reference to him. Dishonor of cheque shall be treated as non payment for that purpose. (iii)If required quantity of securities can not be bought in as per sub regulation (i) because of suspension of the trade or de-listing of a security or for any reason whatsoever, the defaulting member shall make payment of the amount equal to the buying price plus the contract charge and commission for the unsettled security by pay order/ demand draft to the clearing house on the next day of the settlement day (i.eT+4) and the buying member shall receive the payment from the clearing house on the second day subsequent to the settlement day (i.e. T+ 5 ) instead of the security in respect of the transaction carried out on trading day

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(iv) The defaulting member shall not be allowed to carry out trading in CSE from the day subsequent to the until settlement day until payment of the difference/ compensation money and a fine as prescribed under regulation 9 are made to CSE. Excess difference money, if any, shall be forfeited by CSE. Provided that if any member fails to make payment and or deliver securities within the settlement day more that once in any calendar month of English era, CSE shall inform SEC in writing details of such default cases immediately after closure of the settlement time determined by CSE for the settlement day , Such member shall not be allowed by CSE to carry on trading in CSE from the day subsequent to the settlement day in respect of the second failure until written clearance to this effect is issued from SEC to CSE. 8) Clearance by delivery of securities and issue of cheque by CSE- The Clearing House shall deliver securities and make payment by account payee cheque issued to member in respect of the transaction carried out on each trading day on the second day subsequent to the settlement day, i.e. T+5, for A and B category companies, and one the third day subsequent to the settlement day, i.e. T+7 for Z category companies respect of the transactions carried out on each trading day. 9) Fine for default: The defaulting member shall be liable to pay a fine to CSE for each default as per the following schedule:
For value equivalent Up to Tk. (one) lac Above TK. 1 lac and up to TK. 2 (two) lac Above TK. 2 lac and up to TK. 10(ten) lac Above TK.10 lac and up to TK. 50(fifty) lac Above TK. 50 lac and up to TK 1(one) core slabs Fine per day TK. 5,000 TK. 7,500 TK.10, 000 TK.25.000 TK. 50.000

Above TK. 1(one) core TK.1.00, 000 plus the amount of fine as per the above fractional

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Market Operation Department (MOP) Time Session Activity 10.00AM- Pre-Opening 1. Members Log into the system 10:20AM 2. Only Limit orders may be entered 3. Disseminate any Information of the listed company 10:20AMOpening 1. System is not available for use during this 10:30AM Session. 2. Opening price for each script is computed. 3. Trade will be executed from among orders entered during pre-opening session as well as pending orders from the last trading day, at opening price. Unmatched orders are retained by the system. 10:30AMTrading Normal Trading i.e. all types of orders, deals 14:00PM accepted. 14:00PMClosing 1) System is not available for use during this 14:10PM session. 2) Closing price for each script is computed. 14:10PMClosing 1) In this Session, Orders that have been input 14:30PM price during Trading Session would be executed if Trading opposite order found. 2) Members may SUBMIT Buy and/ or sell orders only in close price order Type. ( Here close price= the Weighted Average price of all Trades of Last 30 Minutes of the day, If not found any trade in Last 30 Minutes, the Weighted Average price of Last 50 Trades of the day.) 14:30PM- Post-Closing 1) Report Print. 15:15PM 10:30AMOdd-Lot 1. For Odd Lot trading. 13:50PM 2. This session is independent of other session and may overlap with any of them.
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Any News Can is Disseminate from 10:00AM to 15:15 PM through MOPS. THE LISTING REGULATIONS OF THE CHITTAGONG STOCK EXCHANGE LIMITED CSE I. PRELIMINARY 1. Short title and extent of applicability: (1) These regulations may be called the Listing regulations of the Chittagong Stock Exchange Limited CSE. (2) The regulations shall apply to all companies and securities applying for listing and those listed on the exchange. 2. (1) In the regulations, unless there is anything repugnant in the subject or context: i) Act means the company Act, 1994; ii) Board means the board of directors of the exchange; iii) Commission means the Securities and Exchange Commission; iv) Exchange means the Chittagong Stock Exchange Limited CSE v) Listed company means a company or a body corporate or corporation or other body which has been listed in accordance with regulations and whose securities are listed and include provisionally listed company under these regulations for trading in provisionally listed companies of the exchange; vi) Listed securities shall include any share, script, debenture, participation term certificate, modaraba certificate, musharaka certificate, term finance certificate, bond, pre-organization certificate or such other instrument as the commission may, by notification in the official gazette, specify for the purpose and which is accepted for listing on exchange in accordance with the regulations;

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vii) Ordinance means the securities and exchange ordinance, 1969(XVII of 1969); viii) Prescribe means prescribed by these regulations or under authority hereof; ix) Regulations means these listing r regulations of the exchange for the time being in force; x) CEO means the chief executive officer of the exchange. 2) Words or expression defined in the Act and the ordinance shall, except those defined herein or where the subject or the context forbids, bear the same meaning as in the Act and the ordinance or either of them and in the case of word or expression bears different meaning under both the Act and the ordinance that meaning which is carried or included in the Act shall prevail and have preferred application. II. LISTING OF COMPANIES & SECURITIES 3.(1) No dealings in securities of a company shall be allowed on the exchange, either on the ready quotation board or cleared list, unless the company or the securities have been listed and permission for such dealing had been granted in accordance with these regulations. (2) The permission under sub-regulations (1) may be granted upon an application being made by the company or in respect of securities in the manner prescribed. The exchange in granting such permission in consider among other things, sufficiency of public interest in the company or the securities. (3) The exchange shall decide the question of granting permission within a maximum period of three months from the date of receipt of listing application. In case the permission is refused, the reason thereof will be communicated to the applicant and commission within two weeks of the decision. (4) The board will be the sole authority to grant, defer or refuse such permission and may for that purpose, relax any of these regulations subject only to two-third

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majority of the directors present at such meeting of the board and so resolving by the majority of them.

IV. PRTOSPECTUS, ALLOTMENT, ISSUE AND TRANSFER OF SHARES

7. (1) No company will be apply for listing or be listed unless it is registered under the Act as a public limited company or has been has set up under a stature and its minimum paid-up capital is Taka ten million. (2) Despite receiving the application for listing and any preliminary Actions thereon, no company shall be listed unless it has made a public issue which is subscribed by not less than 250 application. (3) The requirements of sub-section (1) or (2) shall not apply to listing of securities, other than shares of companies, unless any law so requires or the commission, in the exercise of its powers under the ordinance, so directs. 8. (1) The prospectus of offer for sale shall be submitted to and cleared by the exchange before an application for its approval is made to the commission. The exchange may require additional information, data, certification or requirement to be included in the prospectus or the offer for sale. If any fails to comply with such requirements, the exchange may be refuse to issue clearance under these regulations. (2) The prospectus or the offer for sale shall conform to and inn accordance with the requirements and provisions of the Act and/or the ordinance and any other law or legal requirement for the commission shall, amongst other things, be a accompanied by the clearance given by the exchange given by the exchange under sub-regulation (1) (3) Without prejudice to the foregoing, the prospectus or the offer for sale shall fulfill all requirements of the law and of the commission and shall state that

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a) the amount of public issue shall be in accordance with the consent order of the Commission, where applicable and the requirements prescribed hereunder or otherwise laid down by the Exchange; b) in all public issues, either by way of prospectus or by offer for sale, the basis of allotment shall be n accordance with the consent order issued by the Commission under the Ordinance; c) in the case of Modaraba or Musharaka, Companies applying for Listing on the Exchange, 30% of the total Paid-up capital shall be subscribed by the sponsors of their associates or friends, relatives and associated undertakings and the balance of 70% shall be offered to General Public including to ICB and/ or other Financial institutions. d) the share certificates shall be issued in such marketable lots as may be determined or approved by the Exchange; and e) the application money shall be refunded, within such time as is prescribed n regulation 9(4), if the Company is not listed on the Exchange for any reason whatsoever or the listing is refused. (4) The prospectus or offer for sale with the perform application form shall be published by the Company in at last one Newspaper each at Chittagong and Dhaka or as the Exchange may in addition require, at least 7 (seven) days in advance but not more than 30 (thiry0 days before the due date of the opening of the subscription list. (5) The Company shall make available to the Exchange and to the bankers to the issue to distribution printed copies of prospectus or offer for sale and application forms in the quantity to be determined by the Exchange and the bankers. The Company shall also accept applications on identical copy/forms. (6) Applications for shares shall be accepted only through bankers to the issue, whose names shall be included in the prospectus or the offer for sale.

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(7) The Directors or the officers, as the case may be shall not participate in subscription of shares offered to the general public.

V. DIVIDENDS AND ENTITLEMENTS 14. (1) Every listed Company shall advise and keep advised by appropriate writings the Exchange of all dividends and entitlement on respect of its listed Securities immediately upon recommendations by its directors through a letter to be delivered under a sealed cover during trading hours of the Exchange. (2) Intimation of dividend and of all other entitlement shall be sent to the Exchange not later than 14 days prior to commencement of the book closure. 15. Every listed Company shall send to the Exchange its financial results, both in the case of half yearly and annual accounts, in such form as may be prescribed by the Commission as soon as these are approved by the directors of the Company. 16. (1) The company shall send to the exchange 50 copies each of statutory reports, annual reports and audited accounts not later than 14 days before a meeting of shareholders is held to consider the same. (2) The company shall send to the exchange copies of all notices as well as resolution at the same of their publication and despatch to the shareholders and also file with the exchange certified copies of all such resolutions as soon as these have been adopted and become effective. (3) The company shall to the exchange 50 copies of half yearly accounts as soon as the same are printed and/or published. 17. (1) Every listed company shall: i) Despatch the interim dividend warrants to the shareholders concerned within 60 days from the date of commencement of closing of shares transfer register for purpose of determination of entitlement of dividend.

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ii) Despatch the final dividend warrants to the shareholders concerned within 60 days from the date of general meeting in which the same has been approved;

VI. ANNUAL GENERAL MEETINGS, (AGM) ETC. 18. (1) A listed company shall hold its AGM and lay before the said meeting balance sheet and profit and loss a/c within 9 months following the close of its financial and in keeping with provisions of the Act. (2) A company may apply to the exchange for extension in time under subregulation (1) and shall pay the following extension fees with such application: (i) Extension for the first month or part thereof: Tk. 5000. (ii) Extension for the 2nd month or part thereof: Tk. 10000. (iii) Extension for the 3rd month or part thereof: Tk. 15000 provided that the above extension shall be allowed subject to and upon production of a letter of approval from the Commission allowing a similar extension. (3) Upon received of the application, with the fee corresponding to the extension applied for, the board may, in its sole discretion, grant or refuse the extension. In the event of refusal the fee paid with the application shall be refunded- retaining 10% thereof a as service charges. (4) Failure to obtain extension from the exchange or if the AGM is not held within time of the extension is refused, it shall made the company liable to penalty at double the rate of extension fees provided above. (5) No further extension beyond the maximum period under sub-regulation (2) shall be granted. In the event of default continuing after the final extension provided herein above, the company shall be liable to an additional penalty @ Tk. 1000 per day for every day of the default and to Action of suspension or delisting as may be decided by the exchange. The exchange may also notify the fact of
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such default and the name of the defaulting company by notice and by publication of the same in the official quotation list of the exchange. (6) The board may suspend/de-list any company which makes a default in complying with the requirements of this regulation and/or fails to pay the penalty payable hereunder or imposed by the exchange. VIII. LISTING OF SUBSIDIARY COMPANY & OTHER MATTERS 24. (1) A listed company distributing shares of its unlisted subsidiary company in the form of specie dividend, right shares or any similar distribution shall get such subsidiary company listed on the exchange within a period of 120 days from the date of approval of such distribution by the shareholders at a meeting of such company. (2) In case of failure of such subsidiary company to apply for listing or refusal by the exchange for such listing on a/c of insufficient public interest, or for any other reason what so ever, the company distributing specie dividend shall and cash the shares of the subsidiary company at the option of the recipients at a price not less than the current break up value or face value, which ever is higher, within 30 days from the expiry of 120 days form the date of refusal of listing which ever is earlier, failure in which behalf shall be default in which event the trading in the shares of the listed company be suspended by the gold or the company de-listed. 25. Every listed company shall notify the exchange immediately regarding changes in its board of directors by addition or removal by death, resignation, or disqualification, as the case may be. 26. A listed company shall obtain prior of clearance of the exchange for any amendment proposed to be made in its memorandum and articles of association before the same are placed for the approval of the shareholders. 27. A listed company shall immediately notify the exchange in respect of any material change in the nature of its business including acquisition or sale or purchase of major operating assets, franchise, brand name, goodwill, royalty and
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all relevant information such as consideration, terms of payments, period of use of such facilities and projected gains and also risk or uncertain factors to accrue to the company. 28. Every listed company shall advise the exchange of:

X. LISTING AND ANNUAL FEES 33. (1) A company applying for listing on the exchange, shall pay an initial listing fee equivalent to one forth of one percent of the PAID-UP CAPITAL subject to a maximum of taka one million. (2) Whenever a listed company increases the paid-up capital of any class or class of its shares, or securities listed on the exchange, it shall pay to the exchange a fee equivalent to one forth of one per cent of such increase. (3) Every listed company shall pay, in respect of each financial year of the exchange, commencing from 1st January and ending on 31st December next, an annual listing fee, which shall be payable by or before the 31st March in each calendar year, as per following schedule: a) Initial listing fee: an amount equivalent to one forth of one percent of total paid-up capital b) Annual listing fee: Slab/paid-up capital (Tk. In million) Above Above Above Above Above Above Above Above Above Above Above Above Above Above Above 10 20 30 40 50 75 100 125 150 200 250 300 400 500 600 & & & & & & & & & & & & & & & up to 10 up to 20 up to 30 up to 40 up to 50 up to 75 up to 100 up to 125 up to 150 up to 200 up to 250 up to 300 up to 400 up to 500 up to 600 up to 700
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Rates of annual listing fees in Tk. 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000 70,000 75,000 80,000 85,000

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Above Above

700 800

& &

up to 800 90,000 up to 100 95,000 Above 1000 1, 00,000

Research Development and Public Relation Department Research & Information Development are essential pre-requisites for effective functioning and development of any tock Exchange. Chittaong Stock Exchange has Research and Information department. This section deals with research and development, library and public relation of the organization. Research and Development Research is a foremost necessity for any stock exchange. In I order to fulfill the need CSE has established a Research Center and are keeping close contacts with the UN bodies, international organizations, rating agencies etc. this department has been publishing a monthly bulletin Portfolio. Library: Chittagong Stock Exchange has also established a specialized library for the use of the operators of the money market. The Country Director of the World Bank Resident Mission in Bangladesh, Mr. Pierre Landell-Mills, officially inaugurated the CSE library. At this library international newspapers, journals, stock market books & publications, information of listed companies, CD ROM, videocassettes for learning on various management tools and on foreign stock markets etc. are available. Public Relation: The main function of public relation section is to raise the public awareness by providing various information to the general public through Press News, T.V. coverage, and Newspaper etc. Another function is to arrange Seminar and Workshops. CSE has been organizing seminars and workshops at home and
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abroad for the benefits of the investors. Approximately eighty Seminars and Workshop have been held in the country and fifteen Seminars and Workshops have been abroad organized for the nonresident Bangladeshis in Washington, New York, Mecca, Medina, Jeddah, Dubai, Tehran and London etc.

Surveillance Department Surveillance Department of CSE control & monitor the market activities such as price movements of scripts, detect market manipulation, monitor abnormal prices and volumes, which are not consistent with the normal trading system. The activities of this department are mentioned below: Circuit Breaker Control Reduction in Price Band Limit If variation in average price of any scrip in a week exceeds the following percentage limits, print-out of price, turnover value and volume data of these scripts is taken out for that week for further analysis and surveillance activity: Previous Days Par Share Market Price Limits 01. Up to Tk. 100 15% but not exceeding Tk 12 02. Above Tk. 100 up to Tk. 300 10% but not exceeding Tk 20 03. Above Tk. 300 up to Tk. 500 7.5% but not exceeding Tk 30 04. Above Tk. 500 up to Tk 1000 5% but not exceeding Tk 40 05. Above Tk. 1000 3% but not exceeding Tk 50 (By Order of the Securities and Exchange Commission) When price rigging cant be controlled even after Appling the existing surveillance measures or it any serious irregularities such as large quantity of bad deliveries, circulation of fake share certificates in the market etc. is noticed in the exchange can suspend trading of those scrip for a period depending on the situation.

High Turnover:
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Surveillance Department of the exchange on a day-to-day basis carries out a though study of the trading pattern of the top 10 scrips by turnover. Such analysis covers the price, turnover volume and value activity by various member in each of the scrips and also the fundamentals of the company.

TRADING SYSTEM OF CSE

The trading system of CSE is a fully automated screen based trading system, which was implemented in June 1998. The system enables the members toe trade nationwide simultaneously. The trade operated on price and time priority. Orders are matched with existing opposite type of orders, which have the best rice. Waiting orders are required to be matched in the following sequences (1) Best Price, (2) Within Price, by time priority. The best buy order will match with the best sell order. The best buy order for a seller is the one with highest price and the best sell order for a buyer is the one with lowest price. An order may match particularly with another order resulting in multiple trades. The CSE trading system CHITRRA has modules Brokers Workstation (BWS): MOPs works exclusively for the trading department of the exchange. This module handles issues like disclosure and circuit breaker.

Surveillance: The surveillance department of the CSE uses this module. This module facilities on line surveillance adding a new dimension to oversee the market.

Versatile Engine for Centralized Trading and Online Reporting (VECTOR): VECTOR is a computerized serene-based trading package developed by CMC Ltd., India for the use of by any Stock Exchange and its member. VECTOR allows entry of Orders, Odd lost, Auctions, in hours deals, displays the best rates for scrips, matches transactions entered and provides information on the status of a traders and quotes, apart from several other facilities. Trading can be carried out using a Broker Work Station (BWS), which can be located within the brokers office.

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Recently a new module Internet Trading Services (ITS) is added to the trading system. Unlike present trading system, here an investor needs not to give written orders to the brokers regarding share purchase & sale rather s/he is able to execute order through own account in ITS via Internet. It must be noted that to get the ITS facilities and investor has to fulfill necessary requirements.

CLEARING & SETTLEMENT SYSTEM

Chittagong Stock Exchange practices a Daily Netting system for its settlement. Members receive a Net-Off statement on every trading day in the post closing session. Accordingly they deliver their dues, both money and scrips to the exchange clearing house on the pay-in day, which is the 3rd day subsequent to the trading day, i.e. T+3. The CSE clearing house sorts and check the scrips and gets the cheques cleared from commercial banks and then deliver scrips and money to the recipient members on the second day subsequent to the pay in day, i.e. T+5. Present cycle is as follows (CSE, May 2002).

Net-Off

Pay-in

Weekend

Pay-out

Sat

Sun

Mon

Tue

Wed

Thu

Fri

Sat

Sun

Mon

Tue

Wed

Thu

Fri

Fig: Clearing & Settlement Process of CSE CSE now provides clearing of both payment & physical share through its Clearing House. When CDBL starts its operation, CSE will only provide payment clearing. SEC in a circular informed that custodian service to the foreign investors will be provided by different Merchant banks from now on that was earlier provided by the Standard Chartered Bank in CSE.

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EVALUATION OF CSE
Evaluation of nay organization needs more concentrated effort. Here a brief subjective evaluation of CSE is done in the form of SWOT:
Strength: The nationwide connectivity and recently the worldwide

connectivity through the Internet is the superiority over the other stock exchange of Bangladesh. efficient management and effective Corporate Governance gives CSE an edge over the competitor.
Weakness: CSEs operation is less effective due to the lack of professional

attitude of the members, lack of Dhaka based member, non-availability of the dual listing facilities, small number of active members, regional image problem, etc.
Opportunity: With the growth of Internet users and governments interest

in the capital market ushers new opportunity for CSE. As a member of SAFE, CSE will get the opportunity toe trade regional (Sough Asian) shares in future.
Threat:

New regulations of the different regulatory bodies (e.g.

Government, SEC, Bangladesh Bank, etc.) change the trade volume in the

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exchange. Besides connectivity to the Internet also increased the security concern of the network.

CSE SCENARIO
Capital Market: In Chittagong Stock Exchange the total issued capital on 31st March 2004 was Tk. 33832 million which was Tk. 31079 million on 31st December 2006. Stock Market Operation: During January-March 2004 quarter the total turnover in Chittagong Stock Exchange was 65.01 million securities while the total amount traded in Chittagong Stock Exchange during the same period was Tk. 1488.60 million (US$ 25.44) during this quarter. Market Capitalization: Total market capitalization of all securities listed with the Chittagong Stock Exchange was Tk. 55452 million (US$ 948 million) as on 31st March 2004 compared to Tk. 60467 million (US$ 1042 million) as on 31st December 2006. Weighted Average Share Price Index: CSE all share price index stood at 1840.9978 on 31st March 2005while it was 1814.1422 on 31st December 2007 the index base is 1000 for CSE.

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AT GLANCE OF CSE (AS ON 31ST DECEMBER, 2007)

1. Types of Organization 2. Registered Address : : Public Company Limited by guarantee having share capital. Chittagong Stock Exchange 1080, Sheik Mujib Road, Agrabad C/A 3. Date of Establishment Authorized Capital Paid up Capital Active Members Number of Members Administration Independent Secretariat Settlement Index Chittagong, Bangladesh. : 1st April 1995 : Tk 150 Million : Tk 21.3 Million : 129 : 185 All member are corporate bodies. : 18 members Board of Directors, 12 Elected & 6 : : : Nominated by SEC. A statutory position for the CSE. Daily netting system All Share Price

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CAPITAL MARKET DEVELOPMENT IN BANGLADESH

The capital markets in Bangladesh have failed to develop for the past seven years. Since the stock market crash in 1996-97 the capital market has made little progress. The price indexes have not increased very much from the through of the crash and the number of IPOs has been very limited. Foreign investors are essentially out of the market, no private mutual funds have been established, and the role of the stock market in financing new industrial investments has declined sharply. The promise of the first half of the 1990s is lost. These markets are a key part of financing the industrial sector. Bank loans alone are very poor instruments to rely on for such projects, as there is so much risk in industrial projects particularly in developing countries, where there is little experience and the policy environment is uncertain compounding the regular difficulties of markets and costs. Excess reliance on loans leads to substantial volumes of bad debt as can be seen in Bangladeshs experience. On the other hand it is difficult to mobilize the required equity from ones own funds. Hence as economic growth gets underway access to an equity market becomes of great importance. In addition this is a particularly easy way to attract foreign investment into the country without having to go through the very difficult process of encouraging direct foreign investment. Developing a capital market is not simple and when successful, results in a certain type of market economy needed to make this market work. The distinction between loan and share investment must be clear. A loan places the enterprise under a liability to repay and if the borrower is unable to do so then

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normally the assets of the company become the basis for recovery to the amount due. The owners would receive only what is left after the loan is paid off. In contrast the share holders have no rights to anything except the residual capital after all of the liabilities of the company have been met. While everyone understands this idea, its power is sometimes minus derstood: If the enterprise goes through a difficult period then the equity investors simply do not receive any dividend and actually may lose if the stock value declines below its price at the time of purchase of the stock. Investors win and investors lose! After a company gets started with its owners initial equity and bank loans, expansion takes place through bringing new capital through an IPO. The capital market is essential for expanding investments of existing companies. There are a number of reasons for the failure of the capital market to develop and this particle explores briefly some of these. In this article we describe the problems and suggest the viewpoint. If there is going to be any development in this critical market then a very bold approach is needed to change the direction of the market. These changes are not easy to take, as will be evident in what follows. It is important to say a few words on the political economy of Bangladesh. First, the elite groups of Bangladesh can be divided into politicians, bureaucrats, intellectuals (broadly including professionals, and successful business persons. For the politicians it is always useful to be able to attack the business community and to stake out a position of helping the people against the alleged exploitative behavior of the private sector. Increasingly the businesspersons are entering into politics so this historical bias is changing, but it is still a powerful influence. The bureaucrats are even more distrustful of private business and perceive the businessman as essentially someone that needs to be controlled by direct action. The simplest way for small investors to enter the stock markets is through investment in mutual funs of unit trusts. These have been the monopoly of the
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governments investment corporation. The ICBs stranglehold on the mutual funds potential has not been broken. The management of these mutual funds is a real mystery and over the years the ICB has tried to prevent anyone from auditing the procedures that are used to create the illusion of a high return when there is no basis for such. Opening the door to the start up of mutual funds for the small investor to join the market is extremely important in Bangladesh. the two actions that that are needed are clear: Throw out the regulations for this area and rewrite these in a realistic way providing an approach that will work in Bangladesh conditions. Second, privatize immediately the ICB mutual funds. The nation has lost five years it time to move in a realistic direction. Another are of some interest is the regulators belief that companies must pay dividends and that they are able to in interfere to change Boards of Directors etc. if a company is not able to pay dividends. This remarkable idea apparently arises from a belief that all companies make a lot of money but they cheat and do not give the profits to the shareowners. This is another manifestation of the systemic distrust of private business in the minds of the regulators. It is of course economic nonsense and reflects the lack of practical experience of the regulators. Their advisers should know better. Companies sometimes fail to make money. This often is due to the market conditions, sometimes due to bad management, and sometimes due to government interference and excess regulation. All of these are good reasons and occur in every country. Why is every business in Bangladesh considered a success with a skillful cheating owner? If companies lose money then it is at the AGMs that the owners take the appropriate action. Of course the regulators have the responsibility to insure that account standards are set and enforced so that everyone knows how well the company has performed. There is much more the regulators could do in insuring that the accounting and auditing of the listed

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companies is properly done. This is their primary job, not interfering in the management of companies simply on the basis of the dividends being paid.

CONTROLLING STRUCTURE OF CAPITAL MARKET IN BANGLADESH

Ministry of Finance

The securities act 1920 Securities & Finance ordinance 1969 Securities & Exchange rule 1987 The SEC Act-1993

Company Act-1994

SEC The Registrar of Joint Stock Companies and Firms CDBL CSE DSE

The Depository act-1999

SEC Act-1920 SEC Act-1993

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BANGLADESH CAPITAL MARKET SUMMARY AS ON 30th June 2007

Indicators No. Companies No. Mutual Funds No Debentures Total No. Of Listed Securities No. Shares of all listed companies No. Certificates of all listed Mutual funds No. Debentures of all listed Debentures Total No of Tradable securities Issued Capital of all Companies Issued Capital of all Mutual Funds Issued Debentures Total Market Capital Total Market Capitalization Weighted Average Share Price Index Tk. Tk. Tk. Tk. Tk. DSE 259 14 08 260 173.50 16.20 0.04 189.82 8275.10 83.50 14.00 49168.40 1642790 1764.18 CSE 208 14 01 185 822.00 26.22 0.005 169.23 8081.51 83.50 1.28 39925 89032 5194.27

** Source SEC Quarterly Review March-June 2007

PROBLEMS & RECOMMENDATIONS

For solving the problems of Chittagong Stock Exchange may be taken into consideration: 35

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Introducing Central Depository System (CSD) To solve the problem associated with physical transfer of Shares, CDS should immediately be introduced. It well ensures proper monitoring, eliminate forgery of share documents, apart from giving the speed of doing business in the capital market. Without CDS the automated system will remain under-utilized. To bring efficiency in the market, particularly with ever increasing trade volume and to derive maximum transparency, CDS should be implemented as soon as possible. Selective Index Should Be Calculated To make appropriate the methodology of index, selective index should be calculated instead of all share price index. This program should be rum immediately to find the proper price index. Appointment of Technical Export More technical expert is to be appointed for system department of minimize the work burden. Fund Transfer The brokers should provide short-term credit line for the investors, so that the investors can buy shares without depositing fund. For this purpose investors be rated particularly the institutional investors to determine Clients credit Worthiness. Following things should also be taken into consideration Interference of all kind should be avoided Monitoring and supervision cell of Regulatory Bodies should work round the clock Chittagong Stock Exchange Broads must allow all operational decisions.

CONCLUSION

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His establishment of Chittagong Stock Exchange introduced a new era in capital market. By the remarkable progress of last five years of Chittagong Stock Exchange has been made possible by the co-operation and assistance of its very skilled personnel, members, SEC, the listed companies and other associated participant, in the stock market. The automated trading system of Chittagong Stock Exchange has removed as the limitations of the traditional cry-out system. It has a great impact over the total economy by increasing total turnover of the stock market.

REFERENCES
1. Review of capital market and national economy by CSE.
2. Bangladesh Capital Market-A publication of Chittagong Stock

Exchange March-2006.
3. Portfolio of Chittagong Stock Exchange, (Jan-Mar; 2006). 4. Annual report of 2003,2004,2005,2006 of CSE. 5. CSE Bazar Porikroma Jan-2006.

6. Share-o-Binioge- A publication of CSE. 7. www.secbd.com 8. www.cse.com

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