View with images and charts Report On Financial Market 1. Financial market: Financial market which consist of a number of institution and market serving business firms, individuals and government. The Purpose of Financial market: Financial assets exist in an economy because the saving of various individuals, corporations and governments during a period of time differ from their investment in real assets. By real assets we mean such things as houses, buildings, equipment, inventories and durable goods. A financial asset is created only when the investment of an economic unit in real assets exceeds its saving, and it finances this excess by borrowing and issuing stock. Of course, another economic unit must be willing to lend. In the economy as a whole saving surplus units (those whose savings exceed their investment in real assets) provide funds to saving deficit units (those whose investment in real assets exceed their saving). This exchange of funds is evidenced by investment instruments or securities, representing financial assets to the holders and financial liabilities to the issuers. The purpose of financial markets in an economy is to allocate savings efficiently to ultimate users. If those economic units that saved were the same as those that engaged in capital formation, an economy could prosper without financial markets. Classification of Financial Market: â€˘
The market for short term (less than one year original maturity) government and corporate debt securities. It also includes government securities originally issued with maturities of more than one year but that now have a year or less until maturity. â€˘
The market for relatively long-term (greater than one year original maturity) financial instruments (e.g. bonds and stocks). •
A market where new securities are bought and sold for the first time (a “new issues” market). •
A market for existing (used) securities rather new issues. 2. Money market: The market for short term (less than one year original maturity) government and corporate debt securities. It also includes government securities originally issued with maturities of more than one year but that now have a year or less until maturity. For example: Insurance company, 3. Capital Market: The market for relatively long-term (greater than one year original maturity) financial instruments (e.g. bonds and stocks). The long term market is called capital markets and consists of securities having maturities greater than one year. The most common corporate securities in this category are bonds, common stock, preferred stock and convertible securities. These securities are found on the firms balance sheet under the designation long terms liabilities and equities taken together. These long term securities comprise the firm’s capital structure. Example: Dhaka Stock Exchange: Dhaka Stock Exchange is the major earliest stock exchange of Bangladesh situated at the main area of the Dhaka, 28th April 1954, DSE was formed. A members council is manage and operate function of DSE. 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. Functions of DSE: The Major functions are•
Listing of Companies.(As per Listing Regulations).
Providing the screen based automated trading of listed Securities.
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.
Publication of Monthly Review.
Monitoring the activities of listed companies. (As per Listing Regulations).
Investor’s 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.
DSE the Clearing and Settlement process: The Clearing and Settlement module provides the management of trade from the point of entry into the Settlement Pool trade database until it has been delivered, settled and removed from the Settlement Pool. It consists of three major business processes. Clearing: participant trade reporting, affirmation, billing and assigning settlement instructions. Settlement: the process of overseeing that delivery of all instruments to the buyer and payment of all moneys to the seller has occurred before removing the trade from the settlement pool. Regulation 4 of the Settlement of Stock Exchange Transactions Regulation 1998 has been given effect time to time. A new directive was made by SEC dated on 18th March 2003 "Adjusted due
position mechanism for settlement of scrip only as provided by regulation 4(1) of settlement of Stock Exchange Transaction Regulations, 1998 shall remain suspended from 19th March 2003 until further order". Here is a complete picture of the settlement system for all of our 378 Instruments in Five (5) groups in the Four (4) markets. A Group: Number of Instruments are 164 (142 + 8D + 14M), Here D for Debentures, M for Mutual funds & TB for Treasury Bonds (Trading in Public, Block & Odd-lot Market with trade for trade settlement facility for scrip only through DSE Clearing House on T+1, T+3 basis). "A" and "DA" are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading Software.
The above cycle is valid for A, B, G & N category instruments traded in Public, Block & Odd-lot market. B Group: Number of Instruments are 18 (Trading in Public, Block & Odd-lot Market with trade for trade settlement facility through DSE Clearing House on T+1, T+3 basis). "B" and "DB" are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading software. G Group: Number of Instrument is 1 (Trading in Public, Block & Odd-lot Market with trade for trade settlement facility through DSE Clearing House on T+1, T+3 basis). "G" and "DG" are
marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading software. N Group: Number of Instrument is 14 (Trading in Public, Block & Odd-lot Market with trade for trade settlement facility through DSE Clearing House on T+1, T+3 basis). "N" and "DN" are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading software. Z Group: Number of Instruments are 97(Trading in Public, Block & Odd-lot Market with trade for trade settlement facility through DSE Clearing House on T+3, T+7 basis). "Z" and "DZ" are marked in BASES columns for Non-Demat & Demat instrument respectively in our TESA Trading software.
This cycle is valid only for Z group instruments traded in Public, Block & Odd-lot market. DES Automated Trading System:
TESA Functional Model
TESA's principal trading functions
Network (LAN / WAN)
PREAMBLE Globally the developments in information & communication technologies (ICT) have created a new instance in the securities market operations. Stock Exchanges all over the world have realized the potentiality of ICT and inclined to the electronic trading systems. It was understood by DSE that technology would ensure transparency, timeliness and satisfaction in customer service. Considering those DSE introduced Automated Trading System on 10th August 1998.In other words, the trading floor moved right into the member's office premises where an investor started to place buy/sell orders. Considering market growth the Automated Trading System was upgraded two times. The recently Upgraded Trading System, started from 30th March, 2008 is capable to handle 1,00,000 trades per day as well as 3000 Trading work stations. HARDWARE DSE Automated Trading System (HP NonStop S7804) is running on fault tolerant, high available, scalable and maintainable Mainframe Server. Previously DSE established the TANDEM NonStop K204 System on September 1998 and on August 2005 it was replaced with highly scaleable HP NonStop S7802. DSE upgraded the Trading System once again on 30th March 2008. The existing HP NonStop S7804 Server is highly fault tolerant to the fact that no single component failure will halt the system. Its constituent parts are hot swappable, and upward compatible; components can be added or removed while the system is running and any compatible new upgraded will work with the system. All disk drives are mirrored so, if any of the disk crashes the exact copy of the data is available at online. Moreover the connecting path for every disk whether it is primary or mirror is also redundant. In every case, minimum two peripheral devices exist. All the components are
working active - active load balancing procedure . To ensure better power quality we have ensured high end UPS's with long durable backup capability, two instant backup generations and other electrical devices. NETWORK (LAN / WAN) All the Member (230 members) Server Applications (MSA) are connected with NonStop HP SSeries Server through either DSE LAN or WAN connectivity. Each member has one or more Trader Work Station (TWS). The TWSs are being connected to the Trading Server via respective MSA through LAN and WAN connection. DSE outsourced MetroNet Ltd., DNS Ltd. , X-Net Ltd., Dhaka Com Ltd., Ranks ITT, Link-3, Royal Green Online Ltd. etc Network Service Providers (NSP under WAN Expansion Project. Now a days members can establish a main office or branch offices to their remote location and can trade smoothly by using different media ADSL, Optical fiber and Radio Link from Dhaka and other important cities such as Gazipur, Narayanganj, Comilla, Hobiganj, Chittagong, Sylhet, Khulna, Barisal, Rajshahi, Bogra at the same time. Two DSE branch offices located at Chittagong and Sylhet is connected via BTTB's DDN link. We also used another connectivity for redundancy for the DDN link. We have a plan to reach the DSE branches in same way. DSE LAN/WAN Expansion With in Dhaka City:
DSE LAN/WAN Expansion Outside of Dhaka
In case of trade interruption due to serious hardware, software, network failure or telecommunication disruption at the Brokerage houses, there is a provision to allow traders to trade at DSE Contingency Trading floor. SYSTEM SOFTWARE The system software is HP Proprietary NonStop KERNEL and includes the database as part of the operating system thereby eliminating the layer typically found in most Database Management Systems (DBMS). The Database functionalities are handled by NONSTOP SQL, which is simply a different operational session for the operating system. The proprietary nature of the system software arguably enhances system security. Operating system is HP's proprietary NonStop Kernel DBMS handled by NonStop SQL. The system software treats all its hardware resources as objects and is thus entirely message driven. This then allows application software to be deployed using client / server architecture providing shared data processing between the central server and the user workstation. The central trading system resides in the Stock Exchange premises, which is running 24 hrs in a day & 365 days in a year. APPLICATION SOFTWARE The application, which runs in DSE for trading, is called TESA (The Electronic Securities Architecture). TESA has two parts: MSA (Member's Server Application) & TWS (Trader workstation). MSA is the "Gateway" between the traders and the Stock Exchange, which manages all the transactions and database operations between the traders and the Trading Engine. TWS is the Front-end Application closer to investors, where they can submit Buy/Sell orders for their desired securities. TESA ARCHITECTURE TESA software is built for the global securities markets. It uses fault tolerant computers, intelligent workstations and client / server design techniques. This provides co-operative processing, high message integrity, continuous operation and fully automatic recovery. This cooperative mechanism enables very high speed processing which is essential for today's electronic markets. TESA's Application Programmatic Interface (API) is the gateway to the TESA system
from the outside world. All external devices connect through the API. The API provides the translation between external devices and internal processes. This means that a new process does not need to be written to support each new device, only the API needs to be modified. SOLUTION BENEFITS The TESA application suite derives significant advantages from being implemented on the HP NonStop platform. The HP NonStop customers have benefited from these advantages. Fault Tolerance: One of the most important automation requirements for any stock exchange system is continuous system availability. With most systems Fault Tolerance is created at the application level. Fault Tolerance is a fundamental design feature of the HP NonStop architecture. Data Integrity: Data integrity is an integral feature of HP architecture. TESA employs standard HP tools to achieve exceptional data integrity. Scalability: The ability of an exchange to accommodate extraordinary increases in transaction volumes without loss of its Capital investment in automation is very important. The HP NonStop Server is massively scalable due to Parallel processors. TESA FUNCTIONAL MODEL An overview of the TESA Functional Model Client / Server: TESA's Client / Server architecture enables an efficient allocation of computing resources and provides easily modified user-friendly interfaces. TESA workstations operate under Windows 95 and can function either as servers on a broker's network or as workstation. These
PRINCIPAL FUNCTIONS OF TESA Market Information: Supplying all market information needed to formulate the buy and sell decisions.
Order Management: Accept, validate and store orders and quotes from broker workstations and / or systems. Order Execution: Automatically executes orders when buy and sell prices match. Trade Reporting: Trade execution reports are provided to each trade participant, to the settlement system and / or the depository and to the market. Index Calculation: Calculates and publishes market indices (DSE General Index & Weighted Average Index.) Market Access: Provide exchange members with efficient affordable GUI-based tools for accessing the market. MARKETS Four types of market at DSE Public
Spot Market: Odd
Instruments are traded in normal volumes under corporate action if any
Block Market: Instruments are traded in bulk volume TRADING SESSIONS TESA conducts trading in-5-phases. Enquiry: In this session Brokers can logon to the system. No order will be submitted in this session. No trade will be executed. Only previous orders can be withdrawn in this session Opening: The Opening is a pure, single-price auction. All buy and all sell orders are compared and calculate the open-adjust price. No trades will be executed in this session Continuous Trading: During this phase, participants enter orders and immediate execution or for inclusion in the book. Automatic matching and execution takes place based on best price/ first in, first out trading rules.
Closing: Closing prices are calculated and disseminated to market participants Enquiry: Market will be closed in this session & other facilities like the previous enquiry session. MARKET CONTROL The Market Control Workstation allows the exchange administrative staff to control the operation of the market, e.g. Session Control: Opening and closing the market via interactive control or by preset timers. Validation Parameters: Setting and viewing parameters that control the trading engine validation e.g. tick size, Circuit Breaker, Circuit Filter, Market lot, Price protection Percentage. Messaging: Allows the dissemination of company announcement data and general market administrative massages. MARKET INFORMATION Market Information is a real-time market data system. It collects, manages, generates and stores information relating to trade instruments and issuing companies. Market Information is responsible for, Collecting Real-Time Market Information: Bids, offers, last sale (i.e. most recent trade price and volume), book and other data are gathered via the Trading engine. It supports TESA's automated and manual trading modules and can process the trades of external and off-market systems. Collecting company Information: All information supplied by the listed companies are maintained in the TESA database. Generating Market Statistics: TESA generates market indices on a real time basis. It generates other statistical information such as Price. BROKER SUPPORT Research and Enquiry: this module provides brokers access to the local Broker Support and TESA databases for enquiries and research purposes.
Public Order Book Broker Order Book The multi-windows environment allows users to simultaneously view orders, market and trades. Broker Support offers Stock Exchange members two configurations; standalone and multi-user. Both configurations maintain a database consisting of information generated by the TESA Server and the local system. Statistical Graphs of DSE: Main Board as on - July 2008 Main Board as on July 2008 Total Number of Listed Securities Total Number of Companies Total Number of Mutual Funds Total Number of Debentures Total Number of Treasury Bonds Total Number of Corporate Bonds
391 271 15 8 96 1 In mn 2,406
Total Number of Shares, Mutual Fund Certificates & Debentures of All Listed Securities* Total Number of Shares of All Listed Companies Total Number of Certificates of All Listed Mutual Funds
2,200 200 In '000 409 2,007 3,000
Total Number of Debentures of All Listed Debentures Total Number of All Listed Gov. T-Bonds Total Number of All Listed Corporate Bonds
Total Issued Capitalof All Listed Securities Total Issued Capital of All Companies Shares Total Issued Capital of All Mutual Funds Total Issued Debentures Total Issued Gov. T-Bonds Total Issued Capital of Corporate Bonds Total Market Capitalisation of All Listed Securities Total Market Capitalisation of All Companies Shares Total Market Capitalisation of All Mutual Funds Total Market Capitalisation of All Debentures Total Market Capitalisation of all Gov. T-Bonds Total Market Capitalisation of all Corporate Bonds Conversion rate:
Tk mn 322,027 115,369 1,866 140 201,653 3,000 970,388 756,814 8,587 576 201,653 2,759 68.52
US$ mn 4,699.76 1,684 27 2 2,943 44 14,162 11,045 125 8 2,943 40 Tk
* Total No.of Shares/Share Capital / Market Capital includes Bonus /Right of shares. DSE Monthly Statistics-July 2008 DSE Monthly Statistics - July 2008 July June 2008 2008
Change Change July % in points 2007
Change in %Month Month Corresponding High Low Year
DSE All Share Price Index (as of 31st July) 2369.03 2588.03 (8.46) (219.00) 1,936.83 22.31 General Index (as of 31st July) 2761.05 3000.50 (7.98) (239.45) 2,384.18 15.81 DSE 20 (as of 31st July) 2526.24 2545.17 (0.74) (18.93) 2192.29 15.23 Total Turnover Value (Tk mn) 65,068.1569,954.92(6.99) 42,698.6952.39 Total Turnover Value (US$ mn) 949.62 1020.79 (6.97) 623.25 52.37 Total Turnover Volume (in `000) 443,826 449,805 (1.33) 348,055 27.52 Market Capitalisation (Tk bn) 955.79 931.03 2.66 541.51 76.50 Market Capitalisation (US$ bn) 13.95 13.59 2.68 7.90 76.57 Daily Average Turnover (Tk mn) 2957.64 3179.77 (6.99) 1940.85 52.39 Exponential Moving Average (as of 31st July) General Index 2833.99 3025.01 (6.31) 2369.67 19.59 DS 20 2594.09 2533.13 2.41 2155.30 20.36 DSE All Share Price Index 2451.64 2588.34 (5.28) 1925.78 27.31 Relative Strength Index (as of 31st July) General Index 25.47 36.88 (30.93) 68.08 (62.58) DS 20 34.49 49.39 (30.17) 75.60 (54.38) DSE All Share Price Index 22.23 42.63 (47.86) 67.49 (67.07) Market P/E (x) (as of 31st July) 19.78 22.80 (13.25) 18.95 4.38 Yield as of 31st July 2.12 1.94 9.28 2.54 (16.54) Trading Days 22 22 22 1US$ =
Sectoral Performance - July 2008
2,602.832,369.03 3,029.242,761.05 2,666.762,526.24 4,061.241,309.26
24,930 9,822 981.13 942.56
DSE Sectoral Performance - July 2008 Sector Market Capitalisation in mn % of totalTurnover Tk. in mn Market July June July June Cap Financial Sector Banks 392,215.12 416,404.03 51.06 18,579.77 26,527.26 Insurance 42,521.39 51,920.89 5.54 5688.47 8073.38 Investment 19,537.96 28,274.18 2.54 4510.90 6186.55 Total 454,274.47 496,599.10 59.14 28,779.15 40,787.19 Manufacturing Foods 18,126.20 12,888.11 2.36 2143.09 1480.93 Pharmaceuticals 77,547.41 84,943.64 10.10 15447.65 9132.64 Textile 15,380.42 14,434.13 2.00 1509.06 1246.00 Engineering 19,541.74 19,635.38 2.54 2474.80 3976.08 Ceramics 1,051.57 1,002.57 0.14 75.09 63.62 Tannery 11,422.84 10,642.71 1.49 3246.08 1818.02 Paper & Printing 469.85 526.29 0.06 0.65 1.39 Jute 247.54 245.63 0.03 0.37 0.60 Cement 42,814.09 41,168.94 5.57 1941.21 1933.76 Total 186,601.65 185,487.40 24.29 26,838.00 19,653.03 Service & Miscellaneous Fuel & Power 91,343.17 73,102.66 11.89 3,889.84 4,680.92 Service & Real Estate 7,289.47 6,979.15 0.95 968.76 1,240.80 IT 3,464.73 3,421.83 0.45 1,113.40 1,452.42 Miscellaneous 22,427.57 20,304.18 2.92 3,341.47 1,911.20 Total 124,524.93 103,807.82 16.21 9,313.48 9,285.33 Corporate Bond IBBL Mudaraba Perpetual Bond 2,758.50 2,927.25 0.36 133.30 229.04 Total 2,758.50 2,927.25 0.36 133.30 229.04
Performance of DS 20 - July 2008
% of total Turnover
28.55 8.74 6.93 44.23 3.29 23.74 2.32 3.80 0.12 4.99 0.00 0.00 2.98 41.25 5.98 1.49 1.71 5.14 14.31
Performance of DS20 - July 2008 SL No.Company Mcap % ofTurnover % of Tk mn Mcap TK mn Turnover 1 Islami Bank 23,800.87 3.02 1,130.72 1.74 2 NBL 19,724.44 2.50 718.07 1.10 3 Uttara Finance 2,676.96 0.34 345.76 0.53 4 Prime Bank 16,721.25 2.12 221.17 0.34 5 Southeast Bank 11,415.92 1.45 171.76 0.26 6 Dhaka Bank 8,771.84 1.11 71.93 0.11 7 Bangladesh Lamps 707.84 0.09 22.41 0.03 8 SingerBangladesh 4,196.58 0.53 75.40 0.12 9 BATBC 14,016.00 1.78 1,734.28 2.67 10 AMCL (Pran) 792.00 0.10 138.45 0.21 11 BOCBangladesh 5,120.95 0.65 950.10 1.46 12 Square Textile 6,478.11 0.82 1,120.81 1.72 13 Beximco Pharma 11,736.97 1.49 4,525.31 6.95 14 ACILimited. 8,209.51 1.04 3,688.16 5.67 15 Square Pharma 37,066.25 4.70 3,603.75 5.54 16 Meghna Cement 906.20 0.11 111.57 0.17 17 Apex Tannery 1,444.37 0.18 448.89 0.69 18 Bata Shoe 5,630.69 0.71 807.50 1.24 19 Monno Ceramic 423.23 0.05 5.74 0.01 20 GQ Ball Pen 609.67 0.08 163.95 0.25 Top 20 Companies by P/E - July 2008 Top 20 Companies by P/E - July 2008 SL Company Name Category PE No 1 The Engineers * A 0.12 2 Azadi Printers * A 0.43 3 Bangladesh Hotels* A 1.80 4 M. Hossain Garments Z 1.81 5 Modern Industries* Z 4.78 6 Peoples Insurance DZ 6.03 7 Meghna Cement DA 6.12 8 Bangladesh Services* A 6.62 9 Beximco Synthetics DA 6.82 10 Himadri * A 6.91 11 First Lease International A 7.48 12 Export Import (Exim) Bank DA 7.60
EPS Dividend TK % 899.57 25% 138.24 10% 6.67 35% 6.36 5% 6.54 0 118.64 10% 65.86 30% 1.66 10%,5%B 19.09 15%B 1.14 10% 49.16 20%B 43.48 25%B
13 14 15 16 17 18 19 20
Therapeutics Jamuna Bank Sonali Aansh Bangladesh Online Delta Spinners Rahim Textile Southeast Bank Dulamia Cotton
Z DA Z DA A A DA B
7.64 7.91 8.44 8.89 9.08 9.14 9.33 9.65
43.05 31.94 28.45 5.96 19.58 37.56 42.88 5.08
0 1B:7 0 20%B 10% 10% 15%, 25%B 5%
Daily Market Data - July 2008 Market Data during July 2008 Date DGEN Change DSI In points In % 02/07/ 2008 03/07/ 2008 06/07/ 2008 07/07/ 2008 08/07/ 2008 09/07/ 2008 10/07/ 2008 13/07/ 2008 14/07/ 2008 15/07/ 2008 16/07/ 2008 17/07/ 2008 20/07/ 2008 21/07/ 2008 22/07/
DSE 20 Securities No. ofVolume ofTurnover Mkt Cap Traded Trades Transaction (Tk in mn) (Tk in (Nos. in lac) mn)
(0.33) 2,588.002,564.41 222
(0.98) 2,564.112,556.39 229
(0.02) 2,567.752,571.95 228
(0.71) 2,555.952,559.16 193
(0.80) 2,555.492,635.91 234
(1.02) 2,536.202,626.24 236
(1.60) 2,507.322,604.03 227
(0.09) 2,501.442,602.16 230
(1.05) 2,483.412,600.26 227
(1.70) 2,453.142,585.78 231 (1.63) 2,415.302,541.45 226
79,102 249 67,633 160
2008 23/07/ 2008 24/07/ 2008 27/07/ 2008 28/07/ 2008 29/07/ 2008 30/07/ 2008 31/07/ 2008
(1.08) 2,473.512,653.08 240
(0.98) 2,448.692,644.06 236
(0.87) 2,426.082,558.87 232
(1.44) 2,369.032,526.24 227
Figure: Market Performance July 2008 Monthly Performance for one year (DSE Performance - July 2008) DSE Performance: August 2007 to July 2008 Month DSE Turnover Value Volume Tk. mn Nos. mn Aug-07 27,720.70 183.00 Sep-07 31,063.47 239.69 Oct-07 41,304.99 329.47 Nov-07 41,328.78 239.00 Dec-07 19,908.95 92.83
Ratio ofIndex Market Cap.DSI to Turnover 0.06 2,059.72 0.05 2,108.48 0.06 2,415.36 0.05 2,511.32 0.03 2,535.96
2,455.09 2,548.18 2,850.81 2,971.11 3,017.21
1,993.54 2,002.61 2,207.20 2,332.48 2,485.87
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08
33447.192 39,953.25 56,620.09 69,288.22 69,950.11 69,954.92 65,068.15
197.925 312.95 380.66 544.42 442.30 449.81 443.83
0.04 0.05 0.07 0.07 0.08 0.08 0.07
2,449.45 2,476.37 2,547.34 2,593.26 2,682.89 2,588.03 2,369.03
2,907.17 2,931.38 3,016.49 3,072.85 3,167.99 3,000.50 2,761.05
2,359.59 2,318.31 2,317.34 2,355.25 2,540.73 2,545.17 2,526.24
Figure: DSE Performance: August 2007 to July 2008 DSE Head Office: Dhaka Stock Exchange Ltd. Stock Exchange Building 9/F Motijheel C/A Dhaka-1000 Phone: +88-02-9564601, Fax: +88-02-9564727
DSE Branch Offices: DSE Chittagong Office Address:
DSE Sylhet Office
Phone: Fax: Address:
Shafi 6, Sheikh Mujib Agrabad Commercial Chittagong-4100 +88-031-2514100 +88-031-2514100 RN
Bhaban Road Area
DSE Khulna Office
Phone: Fax: Address:
Chowhatta Sylhet +88-0821-2830975 +88-0821-2830975 Chamber Mansion (6th Khan-A-Sobur 5, K.D.A. Commercial Khulna
Floor) Road Area
Securities and Exchange Commission (SEC) The Securities and Exchange Commission (SEC) was established on 8th 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. Members perform the following functions: •
Serve as the members of the Commission and supervise its management.
Provide policy direction to industry and staff and promulgate legally binding rules.
Act as an administrative tribunal for decisions on the capital market.
4. Primary Market: •
A market where new securities are bought and sold for the first time (a “new issues” market). •
Purchases and sales of existing stocks and bonds occur in the secondary market. Transactions in this market do not provide firms with additional funds to buy new plants or buy new equipment. However, the presence of a viable secondary market increases the liquidity of securities already outstanding. Without this liquidity, firms issuing new securities would have to pay higher returns because investors would have trouble finding a resale market for
their stocks and bonds. Thus the ongoing trading of existing securities is crucial to the efficient operation of the primary or new issues market for long term securities. The secondary market for long term securities consists of the organized exchanges such as the New York Stock Exchange, the American Stock Exchange and the New York Bond Exchange. 5. Investment Banker: A financial institution that underwrites (purchase at a fixes price on a fixed date) new securities for resale. The investment banker acts as a middleman in bringing together parties who need funds with those who savings. The principal function of the investment banker is to buy the new securities from the issuing company (at whole sale) and then resale them to investors (at retail). For this service, investment bankers receive the difference or underwriting spread, between the price they pay for the security and the price at which the security is sold to the public. Because most companies make only occasional trips to the capital market, they are not specialists in the distribution of securities. There are three primary means by which companies offer securities to the general public, a traditional (or firm commitment) underwriting, a best efforts offering and a shelf registration Functions of investment Bankers and Distributed below: •
Figure : Investment Process in Investment Banking Maxwell corporation
Managing Investment Banker
Issues 250,000 additional shares of stock Merrill Lynch
15 investment bankers( including Merrill Lynch)
Selected Dealer Group
Public 6. Privileged Subscription: The sale of new securities in which exiting shareholders are given a performance in purchasing these securities up to the promotion of common shares that they already own; also known as a rights offering. 7. Preemptive Rights: Definition: The right of current shareholders to maintain their fractional ownership of a company by buying a proportional number of shares of any future issues of common stock. Most states consider preemptive rights valid only if made explicit in a corporations charter also called subscription privilege or subscription rights. Terms of Offering: When a company offers its securities for sale by privilege subscription, its mail its shareholders one right for each share of common stock that they hold. With a common stock offering, the rights give shareholders the option to purchase additional shares according to the terms of the offering. The terms specify the number of rights required to subscribe for an additional share of stock, the subscription price per share and the expiration date of the offering. The holder of rights has three choices: â€˘
Exercise the rights and subscribe the additional shares
Sell the rights because they are transferable
Do nothing and let the rights expire.
Value of Rights: The market value of a right is a function of the present market price of the stock, the subscription price and the number of rights required to purchase an additional share of stock. The theoretical market value of one right after the offering in announced but while the stock is still “rights-on” is Ro = Po-[( Ro)(N)+ S] Where, Ro = market value of one right when the stock is selling “rights-on” Po= market price of a share of stock selling “rights-on” S= subscription price per share N = number of rights required to purchase one share of stock Theoretical value of one share of stock when it goes “ex-rights” Px is ( Ro)(N)+ S Px = N+ 1 Theoretical value of a right when the stock sells “ex-rights” Rx is Px - S Rx = N 8. Private Placement: Definition The sale of an entire issue of unregistered securities (usually bonds) directly to one purchaser or a group of purchaser (usually financial intermediaries). Financial Intermediaries is the financial institutions that accept money from savers and use those funds to make loans and other financial investments in their own name. They include commercial banks, saving institutions, insurance companies, pension funds, finance companies and mutual funds. Features
One of the more frequently mentioned advantage of a private placement is the speed with which the private deal is transacted. A public issue must be registered with the SEC, red herring and final prospectuses prepared and printed and extensive negotiations undertaken. All this requires times. In addition, public issues, always involve risks with respect to timing. Private placement on the other hand, are not subject to SEC registration requirements, because it is felt that persons or institutions with enough capital to buy an entire security issue should be able to acquire on their own kind of information that registration would disclose. The private placement of debt is negotiated; the exact timing in the market is not a critical problem. The fact that there is most often only a single investor or small group of investors is attractive if it later becomes necessary to change any of the terms of the issues. It is much easier to deal with one investor than with a large number of securities holders. Advantage of a privately placed debt issue is that the actual borrowing does not necessarily have to take place all at once. The company can enter an arrangement whereby it can borrow up to a fixed amount over a period of time. For this credit arrangement, the will pay a commitment fee. This type of arrangement gives the company flexibility, allowing too borrow only when it needs the funds. Developments in the Market: Starting in the 1980s private placement gained renewed importance as lenders sought to protect themselves from some of the adverse effects caused by prevalent corporate restructurings. Advantage of institutional investors is that the SEC now permits them to resell securities generated in the private placement market to other large institutions. Thus US companies, as well as foreign companies can issue bonds and stocks in the market without having to go through public market registration procedures. Then qualified institutional buyers (QIBs) can sell the securities to other institutional buyers without waiting out any holding period and without subjecting the issuer or security holder to additional regulation by the SEC. As a result the market becomes broader and more liquid. 9. Initial Public Offering (IPO): Initial public offering (IPO), also referred to simply as a â€œpublic offeringâ€?, is when a company issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.
In an IPO, the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market. IPOs can be a risky investment. For the individual investor, it is tr4ough to predict what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, and they are therefore subject to additional uncertainty regarding their future value. Procedure IPOs generally involve one or more investment banks as “underwriters”. The company offering its shares, called the “issuer” enters a contract with a lead underwriter” to sell its shares to the public. The underwriter then approaches investors with offers to sell these shares. The sale (that is, the allocation and pri9cing) of shares in an IPO may take several forms. Common methods include: •
Self Distribution of Stock
A large IPO is usually underwritten by a “syndicate” of investment banks led by one or more major investment banks (lead underwriter). Upon selling the shares, the underwriters keep a commission based on a percentage of the value of the shares sold. Usually, the lead underwriters, i.e. the underwriters selling the largest proportions of the IPO, take the highest commission- up to 8% in some cases. Issue price A company that is planning an IPO appoints lead managers to help it decide on an appropriate price at which the shares should be issued. There are two ways in which the price of and IPO can be determined: either the company, with the help of its lead managers, fixes a price of the price is arrived at through the process of book building. Law, Policy, and Advocacy
IPO advocates cost effective and reliable patent, trademark, copyright, and trade secret protection and urges laws to provide reasonable certainty and avoid undue litigation. Current initiatives include: •
Promoting legislation to reform U.S. patent and trademark laws.
Filing amicus briefs with U.S. courts.
Ending permanently the government practice of diverting user fee collections from the USPTO.
Working to harmonize the world's patent laws.
Combatting counterfeiting and piracy in the U.S. and abroad.
This section includes recent developments in IP in Congress, the courts and the international arena, IPO position statements and amicus briefs, and links to other IP organizations. Use the links to the left to navigate through this section. Meetings and Events IPO promotes professional development and networking through an extensive offering of conferences and other meetings and events. IPO events bring together experts from the U.S. and abroad to discuss recent trends and developments in IP law and IP-related business issues. Mark your calendar for the 2007 Annual Meeting, September 9-11 in New York City. Member Services and Publications IPO provides varied information services to members. The IPO website is a leading research tool, containing over 7,000 web pages including information about legislation and summaries of all precedential Federal Circuit patent and trademark rulings for the last ten years. Content is added daily. This section contains unique resources for members not available elsewhere, including:
Online archives of the e-mailed IPO Daily NewsTM, a source of information on legislative and international events
Searchable membership directory
IP Career Bank
IP Articles and Reports
The Top 300 Patent Owners lists dating back to 1984
A selection of IP statistics and general information about patents and trademarks, and materials from previous IPO meetings.
10. Developments in the Market: Starting in the 1980s private placement gained renewed importance as lenders sought to protect themselves from some of the adverse effects caused by prevalent corporate restructurings. Advantage of institutional investors is that the SEC now permits them to resell securities generated in the private placement market to other large institutions. Thus US companies, as well as foreign companies can issue bonds and stocks in the market without having to go through public market registration procedures. Then qualified institutional buyers (QIBs) can sell the securities to other institutional buyers without waiting out any holding period and without subjecting the issuer or security holder to additional regulation by the SEC. As a result the market becomes broader and more liquid.
Published on Feb 10, 2013