Dhaka Stock Exchange Collapse of 2010—2011

Topics: Stock market, Stock exchange, Stock Pages: 24 (3982 words) Published: April 16, 2014

Dhaka Stock Exchange Collapse of 2010—2011


Chapter-1: Brief history of DSE4
1.1 History4
1.2 Formation4
1.3 Management5
1.4 Trading Time5

Chapter-2: Previous major crash- 19966
Chapter-3:Causes of the 2010-2011 crash 7
3.1 Margin Calls & Illiquidity crisis7
3.2 Program Trading8
3.3 Derivative Securities8
3.4 Role of market regulators and their employees8 3.5 Demutualization of Exchanges9
3.6 Investment of bank in the capital market10
3.7 Pre-IPO & IPO process10
3.8 Uniform face value of share10
3.9 Placement trade / Kerb market11
3.10 Omnibus account12
3.11 Asset revaluation & Rumor12
3.12 Book building method12
3.13 Serial and artificial trading13
3.14 Issue of Right and preference share13
3.15 Suspicious transaction of top players14
3.16 Block placement14
3.17 Direct listing14

Chapter-4: Impact of the Crash15
Chapter-5: Bailout plan/ Measures taken17
5.1Steps taken by government17
5.2Steps taken by SEC18
5.3 Steps taken by Bangladesh Bank19

Chapter-6: Outlook for the future19
Chapter-7: ARAMIT 2010-201321

References 23

1. Brief history of DSE
Dhaka Stock Exchange (Generally known as DSE) is the main stock 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 Stock Exchange had over 750 listed companies with a combined market capitalization of $50.28 billion. 1.1 History

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. The formula for calculating DSE all share price index was changed according to IFC on 1 November 1993. The automated trading was initiated in 10 August 1998 and started on 1 January 2001. Central Depository System was initiated in 24 January 2004. As of November 16, 2009, the benchmark index of the Dhaka Stock Exchange (DSE) crossed 4000 points for the first time, setting another new high at 4148 points. In 2010, the index crossed 8500 points and finally crashed in the first quarter of 2011. 1.2 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 this company 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. 1.3 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

President of Institute of Chartered Accountants of Bangladesh President of Federation of Bangladesh Chambers of Commerce and Industries President of...

References: Figure 3: Daily DGEN index of January, 2011
Figure 4: Showing the Movement of DSE General Index from June- ’10 to May- ‘11
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