Dhaka bourse moves to revamp OTC market

The Dhaka Stock Exchange has moved to revamp over-the-counter (OTC) market so it becomes more active and attractive.

One of the measures planned will be to allow small cap companies to raise funds through listing on the OTC market set up in September 2009.

Non-listed companies with a paid-up capital of a minimum Tk 1 crore and a maximum Tk 5 crore can raise funds from the OTC market, instead of the main market, where the listing of small cap companies is discouraged.

But before the plan comes to fruition, the transaction process has to be made easier and more functional, as the existing system allows investors only to offer a price in case of selling shares whereas they cannot quote a price when they want to buy, according to an official of the DSE.

“There must be a buy option just like that in the main market to make the transaction process easier and functional,” he said.

The DSE has sent a set of proposals on how to improve the OTC market, to the Bangladesh Securities and Exchange Commission (BSEC) for approval.

The bourse has proposed creation of at least two categories for the companies that are listed on the OTC market.

“We will go for the next course of action after receiving instructions from the regulator,” the DSE official said.

The premier bourse launched the OTC market for setting up a separate trading floor for junk shares. The aim was to ensure discipline and transparency, enhance efficiency and safeguard the interests of retail investors.

Before the OTC came into being, prices of many shares had increased abnormally even if there were no declarations of price sensitive information such as dividends, net income or earnings-per share.

The DSE management even could not locate the physical presence of some companies. But the trading of their stocks had been going on as many retail investors were unaware of the companies' latest status. Investors were buying these stocks only to make money from daily trading. Listing on the OTC market means either these companies are non-performing, non-operational or non-existent.

Presently, 66 companies are listed on the OTC market. More than 4.6 lakh shares of six firms were traded on the market between March 1 and March 15, generating Tk 4.72 crore, according to DSE data. Shares of 12 companies were never traded on the market.

THE UNTRACEABLE 11

There is no existence of 11 companies that were listed on the Dhaka bourse between 1986 and 2001. After the placement of these companies from the main market to the OTC market in 2009, the DSE tried to trace them in their addresses mentioned in their prospectuses at the time of the listing. But the efforts went in vain.

The companies are: Amam Sea Food, Bangladesh Electricity Meter, Chic Tex, German Bangla JV Food, M Hossain Garments, Metalex Corporation, Pharmaco International, Rangamati Food Products, Raspit Data Management, Raspit Inc Bd and Saleh Carpet Mills. These companies had issued 4.87 crore shares.