Press Release

“Derivative and Book Building” indispensable for bolstering market depth Says, Mr. M A Malek, Editor Azadi at CSE’s workshop

Chittagong Stock Exchange in order to promote “Derivative instrument and Book Building method” organizes a workshop for the local journalists’ community today at CSE Conference Hall.

Mr. Abdul Malek, Editor of the Daily Azadi was the Chief Guest of the occasion. Mr. Malek in his address said, “ In the wake of hard realization across the world, Capital Market is very important and effective source of resource mobilization for the sustained growth and progress of a country, the workshop purports to be very significant and a worthy initiative. I am also optimistic that the intelligent deliberation and rational presentation of the learned participants of the workshop shall help us to obtain a vivid picture of our Capital Market scenario. It will also immensely contribute the participants to draw a wide spectrum of pragmatic recommendations to invigorate our ailing Capital Market to exploit its fullest potentials.”

He said, “ Every where in the world, Capital Market can play a key role for attaining lasting and comprehensive economic growth of a country in the way of rapid industrialization and employment generation through facilitating capital formation efforts for new and existing ventures at the lowest cost and risk. The more active and vibrant the capital market of a country, the greater its industrialization pace and robustness of economy. In fact, in order to bring due momentum in industrialization process and thus attaining economic emancipation for the common people of the country, presence of a healthy and transparent capital market is must. Without the existence of a strong, predictable and accountable capital market, desire to achieving a sustained socio-economic development would remain a far cry.”

He further said, “It can be well mentioned that a vigorous capital market can play a commendable role for accelerating our much coveted industrialization process. Notwithstanding the fact, as you are aware, the market indeed fails to perform its due role as expected, owing to some impediments and weakness, despite having huge prospects and potentials. With an honest view to expedite the industrialization process of the country by converging the small and big investors as well as alluring foreign investors, capital market in Chittagong was established 12 years back in 1995 under the leadership the then erstwhile President Mr. Amir Khosru Mahmud Chowdhury. Mr Chowdhury was able to encompass many renowned businessmen in our society evicted them to take seat in Chittagong Stock Exchange and finally the shape of CSE gained international recognition.”

Mr. M A Malek, Editor, The Daily Azadi is addressing towards the Journalists Community on the occassion of a workshop on " Derivative and Book Building" at CSE Conference Hall, Chittagong.

Sometimes I feel proud to see manifold dynamic approach led by CSE when many achievements came through under their team efforts. South Asian Federation of Stock Exchange (SAFE), Automation in trading, Internet Trading Services (ITS), Nationwide online trading facility, brainchild Central Depository System, Over The Counter trading module (OTC), all these futuristic infrastructures are examples led by CSE for our Capital Market Development.

At present our market capitalization is around 6 billion US dollars, which is approximately 8% to 9% of GDP, whereas in India, market capitalization is 80% of their GDP and in Pakistan is 40%, in Srilanka 35%.

After the cataclysm in share market 1996, the government as well as the conscious concerned persons become stirred and started formulating various rules, regulations and orders to protect the interest of the investors and the share market. Some of these are highly commendable and contributed to some extent at least to put a break on the flagging confidence of the investors. Some of those also backfired. Recent establishment of Central Depository System (CDS) is that of a praiseworthy step which is considered a vital instrument for the development of country’s feeble capital market. The paperless electronic trading, transfer and settlement system of CDS of share transaction will likely to eliminate problems of fake share, lost share, stolen share, long settlement cycle, operational efficiency that often occur in manual handling. However, I feel that the introduction and implementation of some good provisions and system on piecemeal basis may at best give temporary soothing but not obviously cure the disease of the capital market. I am sure that we would be able to know lot more practical & pragmatic recommendations from our journalists on how to address the hurdles prevailing in our capital markets and thus make it vibrant.

CSE is running out to attribute more products and facility in our Capital Market for the interest of our investors. Today you will learn about “Derivative and Book Building” from the presenter that are widely traded in the developed countries’ Stock Exchanges. For example, in the National Stock Exchange of India, their total volume of trade of Derivative is much higher than Equity products. Introduction of Derivatives will push the liquidity of the existing equity market. Awareness among the investors, journalists, professionals etc. in this regard is essential.

Pricing of an IPO needs to achieve the appropriate balance between the demand of the company’s share and the investor. In most of the countries, public issue of common shares is generally carried out in two ways; i) Fixed price method, and ii) Book-building method. In our country we follow for IPO through fixed price method that does not provide comfort to the big issuer in regard to actual price discovery of their particular issue and they feel shy to go public for inappropriate pricing of their securities. This feeling lead many companies looking at other avenues for raising funds instead of IPO. Therefore, demand of scientific process of price discovery through IPO introduces “Book Building”. The issuer in association with the issue manager sets a floor price with a price-band, with a lower limit (‘the floor’) and an upper limit (‘the ceiling’) within which the investors are allowed to bid for shares. The final price, however, is determined based on the demands received from the investors. The investors’ demand at a specified price band is recorded in an electronic order book and a book is built. Thus the term 'Book-Building' emerges.

Mr. Nasiruddin Ahmed Chowdhury, First Vice President of CSE in his address said, “CSE is working for the entrepreneurs and investors to create a friendly environment through diverse products like Derivative or policy like Book Building method. We are very much optimistic that our Capital Market will cope with “Derivative” very soon.”

Mr. A B Siddique, Chief Executive Officer of Chittagong Stock Exchange said, “Without awareness and cooperation from the Journalists Community Derivative or Book Building will not be materialized.”

Mr. Atiquzzaman, GM and Head of Compliance interacted with the Journalists while Mr. Maksudur Rahman, DM Corporate Development and Mr. Mortuza Alam, DM, Compliance presented slides on “Book Building” and “Derivative” respectively. A good number of Journalists were attended the workshop. CSE Director Mr. Bijon Chokroborty was also present in the occasion.

AKM Shahroze Alam
Deputy Manager