Internship Report - Chittagong Stock Exchange An Evaluation of Its Operation

PART - ONE
Preface
First of all I would like to be grateful to the almighty Allah, The merciful
and the benevolent that has enable me to complete this report.
The Internship Program, a part of the academic discipline, for the MBA
student has been designed to acquire practical knowledge. It is expected
that the integration of knowledge in theories and practices will enable us
to become effective, through the internship program. I have got the
chance to acquire some experience, which is expected to enlighten my
career.
It’s really a great opportunity to have chance to conduct internship
program in the Chittagong Stock Exchange, 1080 SK Mujib Raod,
Agrabad, Chittagong, Bangladesh I have tried my level best to be
acquainted with the activities and roles of Chittagong Stock Exchange.
The tenure of the program was only one months. As a consequence, it
was impossible for my to know in details about the various activities
preformed index Chittagong Stock Exchange. Yet I tried to make the
report effective, informative and representative.
Finally, it is my earnest and sincere hope that this report on “Chittagong
Stock Exchange” would be found useful by the individuals who want to
know about Chittagong Stock Exchange.
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Acknowledgement
I am grateful to some particular persons who have helped and encouraged

me at each & every step. At the very outset I extend my heartiest
gratitude to my honorable teacher Tunazzina Sultana, Assistant Professor,
Department of Marketing, University of Chittagong for their massive
support, supervision, guidance and cooperation. Special tanks go to Mr.
Kamal and Khaled Jubair for their cordial support coordination to
accomplish this report. I would like to think officials of CSE namely Mr.
Monirul Hoque, Mr. Hasan Arman, Mr. A. Halim, Mr. Shahidullah, Ms.
Israt for their cordial cooperation and wounderful presentation. I have to
memorize all of the officials of CSE as well, I would like to thank my
friends to cooperate me during the program and preparation of the report.
My thanks also go to the composers of various articles & papers that we
gone through.
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Executive Summary
This report concentrates on the overall performance of the Chittagong

Stock Exchange. From the very beginning of taking birth, this
organization is playing an outstanding role for the betterment of the
capital market in this country. To say the truth, CSE is playing the
leading role for the betterment of the capital market is this country. To
say the truth, CSE is playing the leading role in the process of
modernization of the capital market so as the match with the demand of
globalization.
This paper briefly presented the performance evaluation of CSE, while
preparing this report, it is found that there are two school of thought in
regard to the performance of CSE, which performing satisfactorily for the
protection of the interest of investors. And the emergence of CDBL is the
proof of that, in their point of view. But the other school opines
otherwise.
It is expected that the capital market will gain more transparence and will
be able to attract the investors through its increased efficiencies and
favorable atmosphere with the supporting activities of CSE in the course
of time.
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PART - TWO
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 objectives of
stock exchange is to provide a market place along with facilities for
together the buyers and seller’s 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 is
development of capital market of Bangladesh, an attempt has been in this
terms paper to study the contemporary practices of the accounts
department as its more informative then the other organization accounts
department.
More over Chittagong Stock Exchange accounts department is very much
publicly related. For this reason the decision maker of the Chittagong
Stock Exchange at the initial stage of the CSE develop its financial
system in this regard that the operation of the accounts department is very
much closer the general investors as well as general people.
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Importance of the Study:
The internship program is very much conductive for the internee students
in order to achieve practical experience, which leads to build up their
career and ambition. The program intends to integrate the knowledge of
operational system of Chittagong Stock Exchange and activities
undertaken by executives in business World. It is expected that the
integration of knowledge in theories and practices will enable us to
become effective.
My report tries to reflect the overall performance evaluation of
Chittagong Stock Exchange. 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, protect the interest of the investors.
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Objectives of the Study:
The prime purpose of the study is to fulfill the academic requirements of

M.B.A. program. Another important purpose of the study is to evaluate
the performance of CSE. The purposes of the study can be stated as
follows:
a) To know the complete history organization and management of

CSE,
b) To know the activities of various department of CSE,
c) To know about the trading system of CSE,
d) To know about the growth and development of CSE,
e) To know about the problems of stock exchange,
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Methodology of the Study:
Collected data and information were tabulated, processed and analyzed
crucially in order to make the paper more informative, fruitful and
purposeful.
In preparing this report I have collected data and information from the
following sources:
a) Primary Data
b) Secondary Data
Primary Data are collected through:

 Observation for the total internee period
 Open ended and closes ended question
 Conducting interview both customers and staffs of the CSE
Secondary Data are collected through:

For secondary data I have gone through different types of publications. I
had also used published data. They are:
 Various publications of CSE
 Various publications of international bodies
 Trade journal
 Research reports connected with the stock exchange
 Internet.
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Scope of the Study:
As I was involved myself a Chittagong Stock Exchange I know various

areas of the stock exchange, its managing procedures, working systems
and environments which are very helpful to know & to increase our
knowledge & to get more information and data regarding my topic. The
information section of Chittagong Stock Exchange is very rich that’s why
I as able to collect the required books, magazines, periodicals, journals,
brochures, portfolio and the Internet facilities.
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Limitation of the Study:
This report has some limitations likely:
i. Being new organization, lacking in secondary information.
ii. The respondents were reluctant to deliver information without
perceiving the services.
iii. Respondents had not clear knowledge about Central Depository
Bangladesh Ltd. (CDBL).
iv. Due to technical (Computerized) system many functions are not
clear to the interviewer.
v. Investors are not fluently giving their opinion due to time
constraint.
vi. Investors are not so much cooperative to give their speech in the
trading session.
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PART - THREE:
Securities and Exchange Commission (SEC):

It commenced its full-scale activities after final inauguration on 14 th
November, 1983 SEC is an autonomous body. The central regulatory
agency which acting capital market including the establishment of fair
trading practices and close supervision of listed companies, markets and
plying 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 capital market.
 To develop the capital market.
 To ensure proper issuance of securities and compliance of law
relating to securities.
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Function of SEC:
Regulating the securities market.
 Registering and regulating the business of stockbrokers, sub-
brokers, share transfer agents, bankers and managers to the issues,
register to an issues 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 published information for the above
purpose.
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PART - FOUR
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.
Mission of the CSE:

The Chittagong Stock Exchange will create a successful well-organized
and transparent market of international standard to save and invest in
Bangladesh in order to facilitate the competent entrepreneurs to raise
capital and speed up industrial growth for overall benefit to the economy.
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Objectives of the CSE:
The prime objectives of the CSE is to create a nation-wide stock market
also beyond the national boundary, which will simultaneously act as a
platform for industrial entrepreneurs and general investors. Explicitly the
objectives of CSE are following:
 To develop a strong platform for the entrepreneurs for raising
capital.
 To provide an investment opportunities for small and large scale
investors.
 To develop a transparent market ensuring investors interest.
 To provide a fully automated trading, Clearing and settlement
system to ensure quick, easy, accurate and easily accessible to all
transactions.
 To attract non-resident Bangladeshis to invest in Bangladesh Stock
Market.
Management:
The Chittagong Stock Exchange has a policy making body of 18
members, of whom 6 are nominated and 12 are elected. This Board
comprised of one president, three vice presidents and 14 Directors. There
is an independent secretarial headed by a Chief Executive Officer (CEO).
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CSE at a glance:
Type of Organization Public Limited Company by

Guarantee
Date of Establishment : 8th June 1993
Registered add : 1080 Shekh Mojib Road Agrabad,
Ctg. BD
Authorized Capital :Tk. 150 Mil $ 2.78 Mil
Paid-up Capital :Tk. 21.3 Mil $ 0.72 Mil
No. of Members :185 all members are corporate bodies
No. of Listed Companies :153
No. of Listed Mutual Funds :10
No. of Listed Debentures :4
CSE All Share Index :1357.21
CSE-30 Index :1352.15
Market Capital :Tk. 56.36 Bil $ 1.037 Bil
Trading Days :Saturday to Thursday
Settlement System :Daily Netting- for A group scrips
T+3(Pay-in) & T+5(Pay-out)
Trade for Trade – for B group scrips
Direct Settlement between Member to
Member for Z group scrips.
Cost of Trade : Commission –0.25% of the Transacted
value from both buyers & sellers.
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Trading Hours:
Pre-Opening Session : 10:00 am-10:20 a.m.
Opening Session : 10:20 am-10:30 a.m.
Trading Session : 10:30 am-14:00 p.m.
Closing Session : 14:00 pm-14:10 p.m.
Close Price Trade : 14:10 pm-14:30 p.m.
Post Closing : 14:30 pm-15:15 p.m.
Procedure of Groupings:
It was a proposal of CSE to Group to securities to ensure the quality of
trading through market adjustment. and as per this proposals to uphold
the interest of investors implements the system SEC facilitated this
grouping system concentrating two Exchange via-a-vis Dhaka Stock
Exchange & Chittagong Stock Exchange.
This grouping system also ensures timely reflection of market
information about the listed companies, which helps to identify the
strengths and weaknesses based on their performance.
Categories of Grouping:
A – Category Companies;
B – Category Companies;
Z – Category Companies;
G – Category Companies;
Details of grouping are given below:
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A – Category Companies:
Companies, which are regular in holding the current annual general
meetings and have declared at the rate of ten percent or more the last
English Calendar year:
Settlement Cycle in Order:
Group-A
Trading day T+0
Settlement day/Pay in T+1
Pay out T+3
B – Category Companies:
Companies, which are regular in holding the current annual general
meetings and have failed to declare dividend at least at the rate of ten
percent or more the last English Calendar year:
Group-B
Trading day T+0
Pay our T+3
G – Category Companies:
G categories are those groups that are generally known as Green field
companies. First three years they are not going into commercial
operation, only one company has in this group, in Lafarge Surma Cement.
Group-G
Trading day T+0
Pay our T+3
Z – Category Companies:
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Companies, which failed to hold the current annual general meeting or
have flailed to declare pay dividend or which are not in operation for
more that six months or whose accumulated loss after adjustment of
revenue reserve, if any is negative and exceeded its paid up capital.
Provided that the chief executive officer of the exchange may bring any
other company under this category, if deemed necessary, with the prior
written consent from the commission.
Group-Z
Trading day T+0
Pay our T+3
On the vases of the aforesaid information we can say that:

Group ‘A’ companies maintain AGM regularly, declare higher dividend
and earning per share and also maintain higher share price and percentage
change monthly. So the investors are interested to invest in this Group
and earn higher profit.
Group ‘B’ companies maintain AGM irregularly, declare higher dividend

and earning per share that Group ‘A’ and also offer lower share price and
percentage change monthly. So the investors are not interested to invest
in this group as not as Group ‘A’. That is why group ‘B’ is less
preferable.
Group ‘G’ companies are those which are going to commence their
commercial operation within three years. At present their share price and
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monthly percentage change is higher than others due the investors’
expectation of higher interest in future.
Group ‘Z’ companies, maintain AGM irregularly than others, their

dividend and earning per share varies time to time. Their share price and
monthly percentage change also very. In spite of this, the investors are
investing in this group for cheaper share price and facility of daily
trading.
Rational of investing in different categories of securities.
 Investment depends on company’s present condition
 Investment depends on the positions of the company which is
comparatively good i.e, A & B.
 If bank interest rate is less than the rate of dividend declaration
then investors invest their capital in the capital market in various
scrip’s.
 AGM is one of the vital most important criteria for invest the
capital in various groups.
 Dividend is one of the vital criteria for investment in different
scrip’s by investors,
Investor’s preference of categories along with seasons;
Most of them like group ‘A’ because

 They give highest dividend i.e, 10% or more;
 They maintain AGM regularly;
 Long-term investment is possible here
 Their overall performance is very is well all the time;
Some of them like group ‘B’ because
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 They give dividend of less than 10%, Which is lower than group
‘A’,
 Held company AGM,
 Investment id possible here,
 Company performance is not so had.
Some of them like group ‘G’ because

 Expectation of higher of profit in future;
Some of them like group ‘Z’ because

 Lower price of share,
 All types of investor (old or new) can trade easily;
 Regular trade.
Importance of Grouping:
Grouping is important on the viewpoint of the investors-
 To make people concern in case of purchase share certificates,
 To asses strong and weak companies for the help of investors,
 To reduce the risk of the investors,
 To encourage weak companies for developing their position,
 To know the managerial effect and overall performance,
 To identify share position,
 To understand the companies performance.
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Limitation of Grouping:
The old investors face the main problem of grouping system. The old
investors purchase their share certificates prior to introducing grouping
system. But after the implementation of this system in 2001, some of the
companies fall down to lower group such as ‘Z’ which was completely
disheartening for the investors holding those securities. At the same time,
new investors loose their interest to purchase share certificates from ‘Z’
group. As a result the scrip’s ‘Z’ group looses their trading value, which
was a big blow for the old investors.
The criterion on grouping system is yet to be a matured one. The strength

of any company doesn’t depend on AGM or declaration of divided only.
There are a lot of companies, which failed to declare dividend or Arrange
Annual General Meeting (AGM) is spite of having sound financial
condition.
Recommendations:
There are some benefits and problems in grouping system of SEC which
is proposed by CSE. Some investors express their opinion in favor or
grouping system. On the other hand some of the investors thinks that
introduction of grouping system is completely unnecessary. As a whole it
can be said that grouping system of SEC failing to satisfy the needs of
various kind of investors.
SEC classified the criteria based on arranging AGM and declaration of
dividend. There are some prospective companies which are not holding
AGM and declaring dividend regularly. But these companies are very
strong in sense of their financial strength.
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A few more words about grouping:
Some of the investors are thinking, why SEC is doing such grouping, and
how they are benefited from it. Some other investors considering that
grouping system is not very much helpful to them as they can’t base on it.
They like to base higher profit is their first preference.
So, in fine, it can be said that grouping is necessary to assess the
company position and to decide the company to invest. So it can play
significant role for the investors to invest their capital in different scripts
and thus to develop the capital market as a whole.
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PART - FIVE
Activities of Various Departments:

The various department of Chittagong Stock Exchange are as follows:
Compliance Section:
 Listing and Membership Department
 Market Operation Department (MOP)
 Surveillance Department
 Inspection and Auditing
Others Sections:
 Systems department (IT)
 Clearing and settlement department
 Accounts and finance department
 Research and developments and public relation department.
The activities of CSE on the basis of various departments are discussed in
respective heads in below:
Listing and Membership Department:

Every company must be listed in the stock market for working thereon
and they have to fulfill various formalities. The listing and membership
department deals with the various formalities of listing and membership
with CSE. Formalities related with the enlistment of a company and
membership are discussed in below:
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Listing Section:
If the companies willing to expand their market may apply for listing with
the CSE, according to the manner prescribed in the Listing Regulations.
Listing Company means a Company or a body corporate or corporation,
which has been listed and include provisionally listed companies.
Unless the company or the securities have been granted, no dealings in
securities of a company shall be allowed.
Eligibility for Listing:

The Company has to be a Registered Public Ltd. that must be
incorporated in Bangladesh under the Companies Act. 1994 with the
office of the Registered of Joint Stock Companies and Firms. It must
have a minimum paid up capital of Tk. 10 million. Shares of a listed
company can be issued through primary market or secondary market.
Application for Listing:

Application for listing in the stock exchange should be made as per Form-
1, under Section (9) of the Securities and Exchange Ordinance 1969
Section-140 of the Companies Act. 1994, within 10 days from the date of
publishment of the Company’s prospectus. The stock exchange shall
grant permission within a maximum period of 3 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 also to the Securities &
Exchange Commission within 2 weeks of the decision. If refused, the
applicant may move a fresh application after six months from the date of
such refusal unless the Board otherwise decides.
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Documents to be Submitted:
At the time applying for the listing, the following documents be
submitted:
 Memorandum and Articles of Association.
 In case of Participatory capital, a copy of the trust deed.
 Copies of audited accounts for the last 5 completed years or a
shorter number of years if the company has been in existence only
for such shorter period.
 A brief history of the company since incorporation giving details of

its activities including any re-organization changes in its capital
structure and borrowings.
 Copy of Agreement or other documents relating to arrangements

with or between Vendors, Promoters, Underwriters, Brokers.
 Certified copies of agreement with Managing Agent, Selling

Agent, Managing Director, and Technical Director.
 A statement containing particulars of materials contracts.

 Certified copies of Agreement with BSB, BSRS, ICB and any
other financial institution.
 Form 2 as printed in the listing regulations.

 A deed of Unconditional Undertaking to abide by the listing
regulations of the CSE.
The listing department checks the above documents and thereafter listing
fees must be deposited to the CSE. Listing fees are of two kinds:
a) Initial Listing Fee
b) Annual Listing Fee
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a) Initial Listing Fee: An amount equivalent to one fourth of 1% of total
paid up capital.
b) Annual Listing Fee: Annual listing fee depends on the amount paid
up. Slab of annual listing fees are shown in below:
Paid-up Capital Rate of annual
(Tk. In million) listing fee in Tk.
Up to 10 10,000
Above 10 & Up to 20 15,000
Above 20 & Up to 30 20,000
Above 30 & Up to 40 25,000
Above 40 & Up to 50 30,000
Above 50 & Up to 75 35,000
Above 75 & Up to 100 40,000
Above 100 & Up to 125 45,000
Above 125 & Up to 150 50,000
Above 150 & Up to 200 55,000
Above 200 & Up to 250 60,000
Above 250 & Up to 300 65,000
Above 300 & Up to 400 70,000
Above 400 & Up to 500 75,000
Above 500 & Up to 600 80,000
Above 600 & Up to 700 85,000
Above 700 & Up to 800 90,000
Above 800 & Up to 1000 95,000
Above 1000 1,00,000
The Board of CSE has the right to ease any condition in case of a
deserving case.
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Continuous Listing Requirements:
The following are the Continuous Listing Requirements:
SL.
Continuous Listing Requirements Reference
No.
1. A listed company shall pay an annual Clause 33(3) of the
listing fee before the 31st March in calendar listing regulations.
year.
2. Whenever a listed company increases the Clause 33(2) of the
paid-up capital, any of its shares shall pay a listing regulations.
fee equivalent to one fourth of one percent
of such increase.
3. A listed company shall hold its AGM Clause 19(1) of the
within 9 months following the close of its listing regulations.
financial year.
4. A listed company shall intimate before 14 Clause 29 of the
days to the Exchange in respect of the date listing regulations.
and time of holding of its AGM or EGM.
5. A listed company shall give a minimum of Clause 13(1) of the
14 days notice to the Exchange prior to listing regulations.
closure of share transfer books for any
purpose.
6. A listed company shall provide a minimum Clause 13(5) of the
period of 7 days but not exceeding 15 days listing regulations.
at a time for closure of Share Transfer
Register, for any purpose, not exceeding 45
days in a year in the whole.
7. A listed company shall advise by Clause 15(1) of the
appropriate writings to the Exchange of all listing regulations.
dividends and entitlement in respect of its
listed securities immediately upon
recommendation by its directors.
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8. Intimation of dividend and of all other Clause 15(2) of the
entitlement shall be sent to the exchange listing regulations.
not later than 14 days prior to
commencement of the book closure.
9. Recommendation or decision of non- Clause 36(5) of the
declaration of dividend. listing regulations.
10. Recommendation or decision of Interim Clause 36(6)(a)(1)
dividend or bonus. of the listing
regulations.
11. Recommendation of a final dividend Clause 36(a)(2) of
(including bonus if any). the listing
regulations.
12. Changing of Capital structure of a listed Clause 36(6)(b) of
Company by issuance of Right or bonus the listing
share (information to Exchange instantly regulations.
by telephone and letter afterwards).
13. A listed company shall send to the Clause 17(1) of the
Exchange 50 copies each of statutory listing regulations.
reports, annual reports and audited
accounts not later than 14 days before a
meeting of the shareholders.
Exchange 50 copies of half yearly accounts listing regulations.
before the expiry of a meeting of the
shareholders.
Exchange copies of all notice and certified listing regulations.
copies of all resolutions as soon as these
have been adopted.
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16. A listed company shall furnish copies of its Clause 20(1) of the
AGM and EGM to the Exchange within 60 listing regulations.
days of such meeting.
17. A listed company shall furnish to the Clause 20(2) of the
Exchange a complete list of all its listing regulations.
shareholders as at the 31st December in
each calendar year.
18. A listed company shall notify the Exchange Clause 36(2) of the
immediately regarding changes in its Board listing regulations.
of Directors, Companies Secretary, and
Registers of Auditors.
19. Proposal for changes in the general Clause 36(3) of the
character or nature of business of the listed listing regulations.
company.
20. Changes of substantial share holding. Clause 36(13) of the
listing regulations.
21. Any change of address of the registered Clause 36(11) of the
office. listing regulations.
22. A listed company shall inform the Clause 40 of the
Exchange regarding loss certificates and listing regulations.
forged certificate as and when a report is
lodged with the company.
23. A listed company shall immediately notify Clause 27 of the
the Exchange of any material change in the listing regulations.
nature of its business.
24. A listed company shall inform exchange of Clause 21 of the
all decision taken by its Board of Directors listing regulations.
and/or shareholders regarding any change
in authorized, issued, or paid-up capital,
issue of bonus shares, right shares or refund
of capital and/or reduction of capital.
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25. Any information necessary to avoid the Clause 36(1) of the
establishment of a false market. listing regulations.
Membership Section:
Nobody can participate in the stock trading without being a member of
stock exchange. There are two types of member:
a) Dealer: They can act as principal and buy for there own accounts and
sell securities from their own inventories.
b) Broker: They act as agents of others and receive a commission from
their clients. They have no rights to buy or sell from their own
inventories.
Application for Membership:

As per company resolution, to get the membership in CSE, It is necessary
to form a limited company and one director will have to be selected as the
representative for dealing with the stock exchange. An application to be
submitted as per ‘Form-Ka’ along with the following documents:
Memorandum of Association Articles of Association of the company
 Tax clearance certificate.
 Letter regarding permission for on-line trading.
 Deed of Declaration as per clause 5(b) of General Rules and
Regulations of CSE
 Registration fees of Tk.1000.00
 ID card fee Tk. 100.00
 Two copies stamp size recent photograph.
Membership Fee:
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Initially the membership fee was Tk. 3,00,000.00(Three lakhs) only. But,
thereafter, this has bees enhanced from Tk. 3,00,000 to
Tk.50,00,000( Fifty lakhs only). This amount can be segregate by:
Face value Tk. 3,00,000
Admission fee Tk. 7,00,000
Premium Tk.40,00,000
Total Tk.50,00,000
Besides, annual membership fee was TK. 25,000. This amount has been
reduced in the year from TK. 25,000 to Tk. 5,000 only.
Every member can appoint maximum five authorized assistant to transact
shares and securities with the Stock Exchange.
Market Operation Department (MOP):

The main functions of this department are as follows:
 Control of Session Management
 Control of Circuit Breaker
 Index Calculation
 Overall control of Trading
Session Management:
The whole session can be divided into various sections. According to
time schedule this sessions are as follows:
Pre-opening session : 10.00 A.M to 10.20 A.M

Opening session : 10.20 A.M to 10.30 A.M
Trading session : 10.30 A.M to 15.30 A.M
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Closing session : 15.30 A.M to 15.40 A.M
Pre-Opening Session:
During the session, limit orders in all script irrespective of their trading
modes would be permitted to be entered into systems, either one or in a
batch mode as described. The members will have the provisions of
viewing the last treating day’s close price and last day’s closing index.
The orders can be deleted or modified or resubmitted in this session.
Opening Session:
During this session, no transaction would be allowed into the system. If
there is no trade for particular script, the opening price would be the
previous closing price. The system use this time to compute the opening
price of each script in the system. The opening price would be calculated
based on the orders of the trading day. The algorithm for calculation of
the opening price would find the price at which maximum trades can be
executed.
Example: The following buy or sell orders submitted to the system during
pre-opening session for the script ABC:
Order type Buy/Sell Quantity Price (Tk)

J1 Limit order Buy 500 410
31
J5 Limit order Sell 800 400
The volume that could be executed at different price is: -

Volume
Price Demand Supply
executable
412 Nil 1700 Nil
410 500 1200 500
405 700 1200 700
402 1900 800 1200
400 2600 ------- 800
Thus, the official price would be taken as Tk. 402, since the volume is
maximized at 1200 shares.
All order can be matched at the opening price, the trader informed
accordingly. Orders, which cannot be matched, are related in the central
trading system (CTS). And would be taken for matching during normal
trading session. Circuit breakers cheeks on the trade price will not be
applied during this session.
Trading Session:
This would be the actual on lion trading session.
In this mode, orders and quotes can be entered depending on their mode
of script. The system would be managed by BBO (Best Bid Offer) from
quotes and from the BBO management.
Example: It is assumed that, trader J1 & J2 gives quote for script ABC as
follows:
Quote Bid Bid Qty Bid Offer Offer Offer
32
Price Total Qty Total
Qty
J1 410 200 400 414 400 600
J2 408 300 600 413 200 800
J3 409 400 800 415 200 800
Thus, the BBO will be formed as follows:

BBO Bid Price BBO Bid Qty. Jobber ID
410 200 J1
BBO Offer Price BBO Offer Qty Jobber ID

413 200 J2
Therefore, it can be said that, the Bid and Offer sides of the BBO is
formed from quote of different jobber.
Closing Session:
This session would again be short session after the closing of the normal
trading session. This session would essentially compute the closing prices
for each script in the system.
The closing price for script would be determined as the weighted average
price of either.
1) All the trade in the last [n] minutes before closing
Or,
2) Up to last [m] trades before closing [If no trades presents in
case (1) above].
The closing price for script would default to the opening price of the
script if there has been no trade in the script during the normal trading
session.
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Odd Lot Trading Mechanism:
Odd lot orders could be entered as limit orders with the order quantity
always not multiple of market lot for that script. This order would be
matched with their counter orders if the quantities match and prices allow
for a match to take place.
Each odd lot order would have the following elements:

 Script code
 Quantity
 Price
 Buy or sell indicator
 Retention (GTC/GFD)
 Client ID (Optional)
Odd lot orders can be entered for any script in the system.
Odd lot would be similar to the order given mode of trading. Only limit
orders are permitted with a special odd lot indicator with the order. The
priority employed for matching these orders would again be price and in
that order.
Example: Assume that the following buy and sell odd lot orders for script
XYZ.
Whose market lot are 50 is entered in to the system.
34
(a) Broker J4 puts in an odd lot order of 33 shares at Tk. 200 as follows:

Limit order Sell 25 200
Since an opposite order of the same quantity exist and a trade is possible
overlap, a trade takes place at the passive order price of Tk. 202 for an
odd lot quantity of 33.
(b) Broker J5 puts in an odd order to buy 25 shares at tk 210 as follows:
No trade will take place through there are two opposite orders which total
to the above quantity, (i.e. 12+13=25). Combination of orders is not done
to form trades. Only one matching is attempted.
Auction Session:
Auctions will be orders entered by the Stock Exchange. There will be a
separate auctions session for entering these orders. Before the start of the
auction session, Stock Exchange is supposed to have entered all its
auction orders.
Following rules will apply for the auction orders:
Their orders will give the following details:

 Buy /Sell type
 Scrupled
 Quantity
 Standard Rate
 Settlement no.
35
Auctions session can be two types viz. open auction or close auction.
This parameter can be set by the Stock Exchange. In open auction session
the solicitor broker can view other solicitor orders in the market. In close
auction the solicitor brokers cannot view others solicitor orders in the
market. Thus, the solicitor brokers are allowed to remove or modify their
orders in close auction.
 The Stock Exchange will decide whether the auction is of Buy or
Sell type i.e. whether the Stock Exchange puts Buy Orders or dell
orders. This is also a parameter that can be set by the Exchanges.
 Stock Exchange enters details like scrupled, Auction orders
quantity, Standard rate, Broker code for that auction order is being
entered and Defaulter Broker Code.
 A cumulative auction quantity and standard rate in each script will
be broadcast to the entire broker when the auction session beings.
 During the auction session the trades can only the opposite orders
(solicitor orders) for the auction orders entered by the stock
exchange.
 A Broker who is a defaulter of many order entered by the Stock
Exchange will not be allowed to place solicitor orders in that scrip.
 The Stock Exchange will specify a standard rate for each of the
scrip when putting the auction order.
 The systems will then the matched solicitor orders as suction
traders to the concerned traders.
 The auction trades currently are not taken into account for
updating the positions of the traders and brokers.
 All unmatched solicitor orders are removed from the system at the
end of the auction session.
 At the end of the auction matching, a delivery list will be
generated which will give a report on the deliveries to be made
36
between brokers, along with the traded value, If total quantity of
auction orders is not exhausted, the balance quantity will be
auctioned at a close our rate which will be calculated as follows-
If any action trade have taken place in the scrip, then
Close out rate = (Weight Average of auction trade price close out %) 100.
Else Close out rate = (Standard rat X Class out %) 100.
Spot Order:
The scrip in which spot trading is to be allowed is decided by the Stock
Exchange.
 The spot order is traded against another spot order only.
 Priority of spot order depends in its price and time.
 A trader can submit multiple spot orders can orders in the same
scrip.
 Spot Orders can be modified or removed before they are traded.
On modification, the spot order losses its time priority.
 The spot BBO is formed of spot orders only and is shown
separately.
Bulk Order Trading:

 Bulk orders are essentially limit orders used for trading in larger
quantities. They are also referred to as block deal.
 Bulk orders will be accepted in the continuous trading seasonally.
The duration of these orders would be same as that existing for
limit orders.
 Bulk orders will not be considered for BBO formation and closing
price calculation.
37
 All other conditions of client code, tick price, filter limits etc. are
applicable for bulk orders similar to the ones applied for normal
orders.
 Bulk orders entered by the broker entered by the broker/trader and
place the appropriate opposite order.
 Big Lot Orders
 This type of orders is almost similar to the Bulk Orders, Except
that the Multiplying factor will be a global system parameter, set
to a value of 2 by default. All other rules pertaining to bulk order
trading apply here also.
Circuit Breakers:
Circuit breakers are checked by the system to verify that the volatility in
the market is controlled. Circuit breakers at checked at matching stage or
at order entry stage. The time at which Circuit breakers have to be
checked can be specified by the Stock Exchange as parameter.
a) Presently, the following rules governs the Circuit Breakers percentage value
or absolute Circuit Breakers value –
Previous day’s per
Sl.No. Limits
share Market price
1 Up to Tk. 200 20% but not exceeding Tk.35
2 Tk.201 to Tk.500 17.5% but not exceeding Tk.75
3 Tk.501 to Tk.1000 15% but not exceeding Tk.125
6 Tk.5001 & above 7.5% but not exceeding Tk.600
38
b) In case of new issue, free trade may be allowed for first 5
consecutive market days and after, above limits will be applicable.
c) In case of receipt of any price sensitive information like declaration
of dividend, bonus/right issue, expansion or joint venture news etc.
from the listed company, free trade may be allowed for subsequent
three market days, and after that above limits will be applicable.
d) The SEC from time to time in order to ensure orderly markets and
also to address the practical aspects may review the above
guidelines.
e) Share prices are controlled by the trading system automatically
according to the above guidelines.
Circuit Breakers:
Circuit breakers are checked by the system to verify that the volatility in
the market is controlled. Circuit breakers at checked at matching stage or
at order entry stage. The time at which Circuit breakers have to be
checked can be specified by the Stock Exchange as parameter.
Presently, the following rules governs the Circuit Breakers percentage value or
absolute Circuit Breakers value –
SL.No. Previous day’s per Limits
share Market price
1 Up to Tk. 200 20% but not exceeding Tk.35
6 Tk.5001 & above 7.5% but not exceeding Tk.600
 In case of new issue, free trade may be allowed for first 5

consecutive market days and after, above limits will be applicable.
39
 In case of receipt of any price sensitive information like declaration
of dividend, bonus/right issue, expansion or joint venture news etc.
from the listed company, free trade may be allowed for subsequent
three market days, and after that above limits will be applicable.
 The SEC from time to time in order to ensure orderly markets and
also to address the practical aspects may review the above
guidelines.
 Share prices are controlled by the trading system automatically
according to the above guidelines.
Share Pricing:
Share is nothing but dividing the total capital in small units. Share price is
determined two times:
1. At the time of initial public offering
2. In the secondary market.
1. At the time of initial public offering

Share pricing during the IPO’s are 3 categories:
a. At per
b. At premium
c. At discount.
a. At per: Normally share is issued at par basis. Here face value and issue
price both are same. Face value of a shre depends on the no of shares.
b. At premium: If, no. of share I Face value
& Vice versa
Let, a Public Ltd. Company has a net asset value of Tk. 1,00,00,000. If
they dividend this amount into 1,00,000 share then price will be Tk. 100.
40
and if they dividend into 10,00,000 share then price of each share any Tk.
10.
c. At Premium: When any public ltd. company takes more than its face
value that is call premium. From the previous example we assume that
face value of each share is Tk. 100. If the company thinks that their net
asset value per share is Tk. 120. So they can issue the share that Tk. 120.
Hence Tk. 20 is premium.
Continuous Trading Index: Calculated considering the trade price of

scripts and it changed with respect of the share price changed.
Close index: Calculated the basis of close price of the shares. It is treated
as the open index for the next day.
CSE Selective Index (CSE – 30):

It is also known as CSE selective index introduces from15th January, 2000
with base index of 1000 calculation method is same as all share price index
calculation method. The difference is only 30 selective company is included
here.
Criteria for a Selective Index:

It provides a discussion about the important criterion for an index, which
is to be used as a benchmark of performance. The criterion is that the
movement of the index fully represents the aggregate movement of the
index’s constituent assets and that investors who have held a portfolio
identical to the asset mix of the index realize the index’s returns. Value –
Weighted Index satisfies the above criterion.
Selection of stocks for the benchmark index should be such that it
represents the whole market. In addition it will be guaranteed that the
constituent stocks have high percentage coverage of the market in terms
41
of market value. This will it difficult if not possible for few investors to
manipulate the movement of the index.
CSE selective index – CSCX:

It is a little different from CASPI. In CASPI all share prices are included.
But here the share price of group ABG are included. The calculation
process is similar to CASPI.
Moreover, share is another index named SEDTORAL Index. It is
prepared on different sectors of CSE. There are 16 sectors under CSE.
Here is an example of such indices.
Clearing and Settlement Department:

This is the busiest department in the Chittagong Stock Exchange. The
function of this department are conducted by the Settlement of Stock
Exchange Transactions Regulations, 1998 if CSE Ltd.” The man
functions of this department are:
a) Collecting security deposit,
b) Preparation of contract note,
c) Informing the position of settlement,
d) To clear and settle the transactions,
e) Automatic buying in and selling out,
f) Charge fine/interest form the defaulting members,
g) Deal with the defective share,
h) Spot transaction,
i) Sending report of the CSE.
The clearing and settlement flow chart shown in the next page
42
The following is the Clearing and Flow Chart:
Accounting Period
Net of statement
Deliver the net

off statement to
Dealer/Brokers
Receive the Trade Receive the

cherub from Fail securities from
the dealer or the dealer or
broker on the broker on the
clearing day
Deposit the
Cherub to the Deposit the
Bank Actions taken as per securities to
the Vault
rules & regulations
Deliver the Cherub

to the Dealer/broker Deliver the
on the Settlement securities to the
day dealer or broker on
the settlement day
FIG: Clearing and Settlement Flow Chart
Clearing & Settlement system of Grouping:
43
Chittagong Stock Exchange practices of following system for its settlement-
Group Criteria/ Eligibility Trading and Settlement
‘A’  All Mutual funds Automated trading and
 Held the current AGM settlement on net basis
 Declared dividend @ 10% or more in the through clearing house.
last English Calendar Year.
‘B’  Which do not fall under group ‘A’ or Automated trading and
 ‘Z’ i.e.? settlement on net basis
 Held the current AGM through clearing house.
 Failed to declare dividend at least @
10% or more in the last English Calendar
Year.
 Continued operations.
 Accumulated loss after adjustment of
revenue, reserve dose not exceed its paid-
up capital.
‘Z’  Failed to hold the current AGM Automated trading and
 Failed to declare any divided settlement on trade for trade
 Not in operation continuously of more basis directly between the
than 6 months members of T + 7 with
 Accumulate loss after adjustment of documentary evidence to the
revenue, dose not exceed its paid-up clearing house of CSE.
capital.
T+0: TRADING
Selling Member Buying Member
T+1
Sheques in
Security to Favor of CSE
to
Flow chart of settlement cycle of A,B & G group shares
Clearing House
of CSE
Cheques in Securities to
Favor of Broker
Members
T+3 44
Flow chart of settlement cycle of ‘Z’ group shares
T+0: TRADING
Selling Member Buying Member
T+4
Sheques in
Security to Favor of CSE
to
Clearing House
of CSE
Cheques in Securities to
Favor of Broker
Members
T+7
Accounts and Finance Department:
45
Chittagong Stock Exchange has a department for working with the
accounting and financial aspects. This department consists of expert
personnel including F.C.M.A. etc. the main function of this department is
to maintain the proper books of account as required by law. The accounts
are required by low. The accounts are being prepared according to
historical cost convention following generally accepted accounting
principles. At the end of financial period, this department prepares
income and Expenditure account, Cash flow statement and also a Blance
Sheet for the projected year.
Taxation:
The Exchange, being a non-profit making organization, applied to the
National Board of Revenue for tax exemption and the same was accepted
on 06/06/1996. After having approval from the Ministry of Law and
parliamentary Affairs, S.R.O No. 102 dated- 18 th June, 1996, was issued
by the Ministry of Finance and this SRO has exempted all stock
exchanges of country from the payment of taxed livable under the Income
Tax Ordinance 1984.
46
Depreciation:
Depreciation on fixed assets is calculated on straight line method, applying the
rate so as to write off assets over this expected useful lives. The rates of
depreciation are as follows:
Particulars Rates
Furniture and Fixtures 10%
Office Equipment 20%
Air Conditioner 20%
Computer 20%
Generator 15%
Electric Fittings 20%
Books 10%
Buildings 2.5%
Fire Alarm System 10%
Electrical Sub-station 20%
Automation Hardware & Software Vehicles. 20%
Full year’s depreciation has been charged on the assets acquired furring
first half of the year whereas, those acquired in the second half has been
provided for six months. No depreciation has been charged on the assets
retired during the year.
R & D Library and P.R. Department:

Research & Development are essential pre-requisites for effective
functioning and development of any Stock Exchange. Chittagong Stock
Exchange has R & D, Library and Relations department. This section
deals with the functioning of this department.
Research & Development:

Research is the foremost necessary for any Stock Exchange in order to
fulfill the need CSE has established a research center and are keeping
close contracts with the UN bodies, international research organization,
rating agencies etc. this department has been publishing a monthly
47
bulletin ‘PORTFOLIO’. It was early published in the name of ‘Market
Update’. This monthly magazine are being distributed to the concerned
persons and agencies including Bangladesh missions abroad, foreign
mission in Bangladesh, Stock Exchange –worldwide etc. CSE also
envisages publishing fact books, booklets on trading rules, clearing and
settlements rules etc.
Library:
CSE 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. The objectives of setting this library are:
to enrich the knowledge of investors and brokers, to encourage the post-
graduate students and teachers to acquire knowledge about capital market
etc. The books of this library include Finance, Management, Accounting,
Stock Market, Economics, and Statistics etc. Besides these books, half-
yearly and annual report of various listed company, World Bank’s
publications relating to the economic survey of Bangladesh are also
available here. CSE has already opened a Home Page on the Internet for
releasing updated market information. At this Home Page programme-
Organisational History of CSE, rules & Regulations of CSE, Foreign
Investor’s incentives, Members’ list, listed company’s details
information, Daily market Statistics (be updated in every one hour) are
available.
Public Relation:
48
The main function of this section is to increase the public awareness by
providing various information to the general public through press News,
T.V coverage, Newspaper etc. Another function is to arrange Seminar
and Workshops. CSE has been organization seminars and workshops at
home and abroad for the benefits of the investors Approximately sixty
Seminars and Workshops and been held in the country and twelve
seminars and workshops have been held abroad organized for the non-
resident Bangladesh in Washington, New York, Mecca, Medina, Jeddah
Dubai, Tehran and London etc.
49
PART - SIX
Trading Procedure Types of Trading System:
There are three types of trading system. These are:

1. Cry out System
2. Automated Trading System
3. Internet Trading System
Cry Out System:

Before starting on line trading at the Chittagong Stock Exchange trading
were conducted through Cry out system. Under this system members and
there authorized assistant of the Stock Exchange who have license to
trade from the Securities and Exchange Commission would come to the
Stock Exchange Floor and participate in trading. But there were a number
of shortcomings of this trading system. The following are the SWOT
(Strengths, Weaknesses, Opportunities and Threats) analysis of this
system:
Strengths:
1. Rapid growth potential in private sector in the country.
2. Industrial base on Chittagong, the Commercial Capital of the
country
3. Independent and efficient Secretariat
4. Adaptation of modern technology right from the beginning.
5. Spelled out vision with time frame.
6. All stock dealers are corporate body.
50
Weaknesses:
1. Old-fashioned trading and manual trading system is unable to copy
with market development.
2. Lack of public awareness about stock market in the country.
3. Current market size is small.
4. Most share transfer offices are not located on Chittagong
Opportunities:
1. Fast growing market.
2. Liberal policy of the Govt. to welcome foreign entrepreneurs.
3. With drawl of lock-in system.
4. Automation can reach the investors all over the country.
5. Fund constraint in financing for modern technologies.
6. Speed of growth in CSE not complemented by the controlling
agency.
7. Shortage of updated expertise in the area.
8. Slow response in change legal framework for complete automation.
Threats:
1. Fund constraint in financing for modern technologies
2. Speed of growth in Chittagong Stock Exchange not complemented
by the controlling agency.
3. Shortage of updated expertise in the area.
4. Slow response in change legal framework for complete automation.
51
Difficulties of Cry-out System and Need for Automation:
The following difficulties were found in the cry-out system
1. Cry-out floor trading was incept and slows down the process of
finalizing deals on the stock exchange floor between the stock
dealers.
2. Manual clearing and settlement system is clumsy and slow causing
an affliction in stock exchange settlement department and
ultimately limiting the trade volume and transactions.
3. Participation in the stock market remains restricted within a
community residing close to the Stock Exchange building the
business can’t be reached out the common mass.
4. Cry-out system was a noisy manual system , the open floor action
was not only messy and tiring for the traders, but also difficult for
the Stock Exchange to monitor the transactions as required by the
rules and regulations.
5. The manual system was error-prone. Errors were very difficult to
detect in the current system.
To get rid of these difficulties, it was very essential at the time to start on-
line trading i.e. Screen based trading system. On line trading be
automated by computer application.
Automated Trading System:

Chittagong Stock Exchange appointed and internationally reputed
consultant. International Securities Consultancy (ISC) was selected
following scrutiny of proposals. The primary tasks of the consultant were
to produce a full Request of Proposal (REP) for establishing the
Chittagong Stock Exchange’s trading system. The REP detailed the
current system, the need and the possible barriers to solving the problems.
Thereafter, an international tender was floated, Finally, in June1997 two
52
MOU (Memorandum of Understanding) were signed with two vendors
CMC of India and Bell core of U.S.A. for design and implementation of
Chittagong Stock Exchange’s automated trading system.
CMC (Computer Maintenance Corporation) commenced its operation in
October 1976 to service all installation left by IBM, CMC’s activities
have advanced in many new directions. It is one of the leading system
integration in the country with multi-faceted expertise in information
technology. CMC Limited has automated a dozen of bourses.
Bell core international of U.S.A. has played a central role in developing
America’s finest tale-communications services. Bell core is the only
company in the world that officer’s end-to-end network expertise
combined with the vendor neutrality.
To fulfill the need of Chittagong Stock Exchange a vector (Standard
product of CMC Ltd.) was customized. The program is window based
and user friendly. The system has three modules-
(1) Brokers Workstation (BWS)
(2) Market Operation (MOP)
(3) Surveillance.
The broker’s workstation module is available from each broker’s office.
This module provides the facility to view the market scenario and input
order. This department handles the market operation is exclusively for the
trading department of the Exchanges issues like disclosure and circuit
breaker. The surveillance department of the exchange will use the third
module. This module facilitates on-line surveillance adding new
dimensions to the issue of overseeing the market in this country.
At Chittagong Stock Exchange end, the server is a struts continuum 400
Fault Tolerant Machine. This server would be connected with the
computers of Chittagong Stock Exchange stockholders. They will dial
into the server and communicate data to deal in stock. The server is
53
located in Chittagong. But regardless of the place, the broker is calling
from; the server will receive, process and revert data. The system is
geographically neutral. To get access to it, members in Dhaka and Sylhet
will need to call only a local number. The connection cost will only be
the price of a local telephone call. All Chittagong Stock Exchange
members are BT & Telephone subscribes. Chittagong Stock Exchange’s
intercity
Internet Trading System:

Internet Trading System or ITS is CSE’s venture on behalf of the brokers.
This site has been provided by the Chittagong Stock Exchange so as to
give customers the convenience to trade or put orders on CSE from any
where in the world irrespective of the trading hours of the stock
exchange. The trading is done by registering on the site under some
existing broker of the stock exchange.
Steps for trading through Internet:

Register on the site as an investor. It is necessary to register under some
existing broker/subbroker in the Chittagong stock exchange.
For additional security there are two passwords, browsing password
which is requched every time a transaction like order entry, modification
etc. is made.
Trading can begin only after the respective broker has approved the
registration and assigned limits for trading.
The investor can do trading during the trading hours of CSE as well as
put offline orders during the non-trading hours, which get added into the
system in the next trading session.
54
The investor can trade only upto the limit assigned to him by his broker.
On exceeding this limit the investor gets suspended.
The objective of ITS is to spread the capital market of Bangladesh

begound the larger cities of the country. Through this system, you can
withness the market senerio on the internet and place buy/sell order
through your broker concurrently.
Usually stock brokers make their own website interactive for their
clientele. Here CSE it self is offering the service on behalf of the stock
brokers. Choose your broker we provide. We treat all members equally. If
you ask which broker to open an accrent with? Our answer is it is your
choice.
The stock exchange will make your broker liable for settlement of your
trades. So naturally they will be careful extremely to set your trade limit.
Check with your brokers to make sure you have sufficient funds and
shares deposited with your broker. Otherwise your order will bounce
back invalid.
Procedures:
Agreement with a broker: As an individual investor you need to upon on
accrent with a broker. When you are willing to use Internet Trading
facilities, you will need to fill in a speial ITS accorent opening form. The
terms and conditions to be followed by you and your broker for ITS, will
be little different from the regular trading account.
All brokers are not eligible for ITS. Please see in the relevant section of
this website or e-mail to us for a list of brokers who can offer you ITS.
Although the form is available on the net, you still need to fill in and
submit to the chosen broker a hard copy of the form duly filled in.
55
Passwords:
When you open an account, your broker will prepare your electronic file.
Your life will be accessible to you only. You will be given a password.
When you will be able to fill in the account opening for electronically,
you yourself will set the password. But it your product a hard copy to
your broker who will key-in your data for you, the password will be set
by the brokerage house staff.
We strongly recommend you to change your password immediately and
from time to time for better security.
Remember, if you give your password willingly or unwillingly, he or she
can place order and nobody but yourself will be liable for all those
transactions.
Deposits with your brokers and your trade limit:
Make sure that you and your broker have signed the safe beeping
agreement. Once you have the safe beeping agreement you can deposit
shares and money to your broker. According to your deposit, the broker
will set limit to your trade.
Know the market on line and offline:

The market is upon, normally from 10.30 in the morning to 2.30 in the
afternoon (Bangladesh Standard Time, Green which time + 6 hours),
prices and depth of market for every scrip may be seen on line. When the
market is closed, the market at the close business will be available.
Placing your order:
56
Your orders placed through this system, If pass the validation test will be
for warded to the CSE trading engine. In the trading engine, orders are
matched on price and time priority.
Execution of trade:
Once you place order in the CSE trading engine, it will be queued to be
matched with another opposite order according to the Chittagong Stock
Exchange Trading Regulations 1998.
Trade Confirmation:
When your order is matched with another order i.e, trade is executed, you
will receive a confirmation note on e-mail. The e-mail will be generated
by the computerized system and will not require any signature.
Post Trade Settlement:

Your Broker will receive a consolidated report from the exchange of your
buy and sell at the end of business. It is the responsibility of the broker.
Collection of money and share certificates from your brokers safe

keeping service of your brokers:
Your broker is bound to make settlement to you by delivery of good
securities and/or payment by cheque” good for payment” within one day
of its receipt of securities and/or cheque from the clearing house.
Lodging a complaint against a broker or a listed company:
You may lodge a complaint with the exchange against default of your
broker within a period of 60 (sixty) days from the date when such default
arose. You may lodge the complaint through e-mail.
57
The securities and exchange commission may cancel the license of a
broker who failed to take reasonable and appropriate measures about eh
complaint of its client and informed him/her accordingly within 30 days
of making complaints to the broker.
Your complaint against a company listed with the exchange may also be
made to exchange through e-mail.
58
PART - SEVEN
Various Committees & its Functions:
Administrative Committee:
 Review the total administrative of the stock exchange
 Receive appeals from the members arising out of any committee
decision.
 Decide disciplinary actions against members on behalf of the
Board
 From sub-committee(s) to look in to any selected agenda.
Finance Committee:
 Recommend revenue and capital expenditure budget.
 Review accounts from time to time.
 Ensure budgetary control.
 Cause to prepare annual accounts for AGM
 Approve special transaction if any
 From sub-committee(s) to look into any selected agenda.
Human Resource Development Committee:

 Prepare and review organ gram from time to time in light of need
of the organization
 Frame rules and regulations for the employees
 Upgrade professionalism through continuous training.
 Receive brief about employment in the organization, overview the
staff turnover.
59
 Receive compensation packages in the light of current market
situation.
 Review reports on recruitment and disassociation.
Trading Committee:
 Continuously review and update rules regarding trading.
 Review market parameters including fixation or margin, indices
etc. and changes search & as and when necessary.
 Receive complains from members on trading activities and decide
thereon.
Technical And Development Committee:

 Review and plan technical developments
 Development business including extension of operations in
different locations
 Develop real estates or significant assets
 Review in and update rules and regulations etc.
 Recommend listing of public companies and IPO’s.
 Suspend/de-listed companies
 From sub-committee(s) to look into any selected agenda
Surveillance & Inspection Committee:

 Frame and update rules for market surveillance & inspection,
 Monitor compliance of rules and regulation by the member and
listed companies,
 Inspection member’s office to ensure proper maintains of books
and record by them.
60
 Carry out other surveillance activities as requires from time to
time,
 From sub-committee to look into any selected agenda.
Clearing House Committee:

 Review and update rules and regulations regarding settlement.
 Formulate regional settlement systems.
 Resolve dispute between members and clearing house.
Default Committee:
 Entertain complaints from the investors against members
 Settle dispute between the investors and the members
 Recommended disciplinary actions against members
Attribution Committee:
 Negotiate and mutually solves disputes arising among the numbers
 Appoint Attributors.
Role of CSE in Investment in different avenues:

I. It collect the scattered savings for investment in large scale industries
production firm and service organization.

II. It enable the company to gather huge capital easily at a cheaper rate.
M. Small investor can enjoy the interest and profit of large

investment thorough CSE.
IV. Through portfolio investment facility CSE reduce the risk of
investors and assure to profit.
61
V. The new and changed rules and regulations of CSE maintain the
interest of investors.
VI. CSE provide necessary guidelines to the investors to invest in the
profitable, prospective and risk-less sectors,

VII. Through providing online trading facility CSE reduced the investors
efforts and problems.

VIII. CSE provides all sorts of investment related information regarding
primary and secondary market through its "Investor's Information

Cell
IX. It also provide updated information regarding secondary market,
IPO, price fluctuation and share transaction through its web site
"www.csebd.com".
X. The investors have to bear no risk by investing in the capital market
through CSE or DSE.

XI. CSE publishes many magazines and publications, which helps the
investors to take efficient investment decisions.
Evaluation of CSE:
Evaluation of any organization needs more concentrated effort. Here a
brief subjective evaluation ion 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.
62
Weakness. CSE's 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 government's

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 exchange. Besides connectivity to the Internet also increased the
security concern of the network.
Way of using marketing tools by CSE:
 Investors need large capital to establish large industries. But it is

not possible for only one person .So CSE encourages the small
investors to invest their savings in various companies share,
which help to increase the capital.
 CSE provides On Line Trading system to buyers & sellers, it

saves time.
 The stock exchange encourage foreign investors into our

country without having any difficult process of investment
which helps to develop the economy.
 CSE acts as a intermediaries which helps to transfer the owner
63
of the shares to the other person without any difficult process &
develops the capital market.
 CSE management teams are very much serious about &

accordingly put due emphasis accounting to need of the capital
market.
 There are many way to research & development process in

Chittagong stock Exchange, which help to develop the
capital market in our country .
 CSE has been publishing some very informative &

analytical publications intended to help explore the financial
performance of the listed securities so that the investors can take
wise investment decision.
 Over the counter market is a new facility launched by Chittagong

stock exchange, unlike in other stock exchange in the country,
for the issuers , investors , capital market and the nation at large
to assist in efficient capital formation by developing vibrant
dynamic & self —regulated capital market . OTC has been
established with a specific mandate to service small & medium
innovative & high growth enterprises in raising resources
efficiently through the capital market.
 By the help of CSE the Investors can withdraw their

investment from the unskilled company's shares & buy the
booming company's shares. It encourages new investors &
develop the capital market.
64
 CSE's state of the —art technology is connected to thee more
major cities of Bangladesh namely Cox's Bazar, Barisal &
Rajshahi for real time on line trading .it helps the investors &
to develop the capital market in Bangladesh.
 CSE used to arrange various seminar ,capital market fair which

help students to know about the stock market & it also
encourage investors to develop the capital market in our
country .
 CSE continuously provides formal & informal Training

programs to develop the human recourses, it also helps to
develop the capital market in Bangladesh
65
Growth and Development of Listed Securities of CSE.
Figure 1: Growth of Listed & Delisted Securities
Analysis: From the above figure we see that the trend of listed securities
is increasing over time. It is clear that participants of the issuer respond
positively and hence they play a vital role in the economy. On the other
hand the trend of delisted securities is fluctuating by turns.
Market Capitalization and GDP of CSE:

We can measure the relationship between Market Capitalization and GDP
by using Correlation Coefficient which are as follows.
Year Market Cap (Mln Taka) GDP M/Cap to GDP

2001 56,363.53 2,621,559.54 2.15%
2002 60,467.72 2,159,561.43 2.80%
2003 85,439.85 1,275,221.64 6.07%
2004 215,010.77 3,832,634.00 5.61%
2005 220,352.80 3,421,627.32 6.44%
2006 270,510.70 2,865,580.00 9.44%
2007
(Upto Oct) 584,588.00 5,314,436.36 11%
66
Figure: Ratio of Market Capitalisation to GDP
Comment: In the above figure we see that the relationship between

market capitalizations to GDP is highly correlated. So, the change in
GDP is very much depended on the changes of market capitalization.
67
PART - EIGHT
Findings:
The prevailing investment environment of Bangladesh is prospective and
congenial. The findings are discussed below:
 Tourism is an extreme prospective sector. It's local and

international market has a vast demand.
 The small and new industries like medicine, ceramic, chemicals

etc. have huge international demand.
 Textile is an important and growing sector for investment. A large

portion of export earnings comes from this sector.
 CSE plays important roles in the investment in different sectors.
 CSE helps investors through IPO and secondary share transaction.
 Govt. of Bangladesh takes different initiatives to encourage foreign

investment.
 Different facilities are given to the sectors that are generating

export earnings.
68
Recommendation:
The prevailing and potential investment sectors of Bangladesh are
obviously prospective . For these sector suggestions are recommended:
 Adequate govt. supports are to be provided to the potential and up-

coming sectors .
 The bureaucratic complexities for new investments are to be

reduced.
 Updated information's, regarding investment, are to be supplied

through different media.
 Quick shipment, transportation and communication facilities are to

be provided by govt. & relates organizations.
 Rules and regulations are to be changed in the capital market to

reduce speculation and manipulation
 The large scale private limited companies are to be provided

special facilities to come towards IPO.
 Public library regarding investors information should be set up.
 CSE Investor's Information Cell (IIC) should be enlarged and

number of important book also should be increased.
69
Conclusion:
At the end point of the report, we can say the that the existing and
potential sectors of investment of Bangladesh are certainly lucrative and
prospective. If proper initiatives are taken these sectors will provide
huge contribution to the economy. CSE plays an important role in the
investment of various Public Ltd. Investors feel secured investing
through CSE as it offer to invest in the ready and strong sectors.
Recently large companies are coming to IPO (Initial Public Offering)
through conversion of public Limited company. If all the profitable
sectors come to IPO CSE will play important in the overall investment
sectors yet it has a great impact on investment through capital market.
70
References:
1. “CSE Bazar Porikroma” A Monthly Magazine Published by

Chittagong Stock Exchange Ltd.
2. Share Bazaar, Published on 5th April, 200.
3. Website of CSE www.csebd.com
4. Website www.bangladeshstockmarket.com
5. Biniyong Nirdeshika- Published by Chittagong Stock Exchange
Ltd.
6. Portfolio-A Review of Capital Market and national Economy, -
October to December, 2003.
7. “Bangladesh Capital Market” – A publication of Chittagong Stock
Exchange.
8. Labh Khoti Jhuki-Sharer Khutinati- Department of Information &
Research, Chittagong Stock Exchange.
9. CSE-30, The Profile of CSE-30 Companies- Published on
December, 2005.
10.Share-e-biniyog- Published by Chittagong Stock Exchange Ltd.
11.Share Bajar, - Monthly Magazine on Share Market, Published on
February, 2007.
12.Previous Internship Report.
71
“CHITTAGONG STOCK EXCHANGE:
AN EVALUATION OF ITS
OPERATION”
(This Report is Submitted for the Partial Fulfillment

of the Degree of Master of Business Administration
with a Major in Marketing)
Submitted To:
Tunazzina Sultana
Assistant Professor
Department of Marketing
University of Chittagong.
Submitted by:
S. Rasheda Akhter
Exam. Roll: 2004/82
Class Roll: 15006
Session: 1999-2000
72
Letter of Transmittal
February 28, 2008
To
Tunazzina Sultana
Assistant Professor
And
Supervisor
Subject: Submission of the Internship Report.
Dear Madam,
I am very pleased to submit my Internship Report on “Chittagong Stock
Exchange: An Evaluation of Its Operation” as a part of the requirement
for the fulfillment of the MBA Program. I have tried to the best of my
effort to prepare the report covering the aspects of the topics according to
your suggestion and guidance.
I believe and hope that one will find this paper informative and will help
future researchers for extended research in this field.
I will be available for any further clarification that one may feel necessary
in this regard.
Sincerely yours
--------------------------------
(S. Rasheda Akhter)
Exam. Roll: 2004/82
Class Roll: 15006
Session: 1999-2000
73
Declaration
I’m S. Rasheda Akhter, Hereby declare that this report name

“Chittagong Stock Exchange: An Evaluation of Its Operation” which
fulfils the partial requirement of my MBA Program is prepared by me.
I also confirmed that, this report is only prepared to meet academic

requirement and not for any other purpose.
(S. Rasheda Akhter)
74
“CHITTAGONG STOCK EXCHANGE:
AN EVALUATION OF ITS
OPERATION”
(This report is Submitted for the Partial Fulfillment

of the Degree of Master of Business Administration
with a Major in Marketing)
Submitted To:
Md. Abu Bakkar Siddique
Chief Executive Officer
Chittagong, Bangladesh.
Submitted by:
S. Rasheda Akhter
Exam. Roll: 2004/82
Class Roll: 15006
Session: 1999-2000
75
February 18, 2008
To
Md. Abu Bakkar Siddique
Chief Executive Officer
Chittagong, Bangladesh.
Subject: Submission of the Internship Report.
Dear Sir,
I am very pleased to submit my Internship Report on “Chittagong Stock
Exchange: An Evaluation of Its Operation” as a part of the requirement
for the fulfillment of the MBA Program. I have tried to the best of my
effort to prepare the report covering the aspects of the topics according to
your suggestion and guidance.
I believe and hope that one will find this paper informative and will help
future researchers for extended research in this field.
I will be available for any further clarification that one may feel necessary
in this regard.
Sincerely yours
--------------------------------
(S. Rasheda Akhter)
Exam. Roll: 2004/82
Class Roll: 15006
Session: 1999-2000
Accounting and Marketing
76
Declaration
I S. Rasheda Akhter, Hereby declare that this report name “Chittagong

Stock Exchange: An Evaluation of Its Operation” which fulfils the
partial requirement of my MBA Program is prepared by me.
I also confirmed that, this report is only prepared to meet academic

requirement and not for any other purpose.
(S. Rasheda Akhter)
77
TABLE OF CONTENTS
Description Page
No.
Declaration
PART - ONE
Preface 1
Acknowledgement 2
Executive Summary 3
PART - TWO
Introduction 4
Importance of the Study 5
Objectives of the Study 6
Methodology of the Study 7
Scope of the Study 8
Limitation of the Study 9
PART - THREE
Securities and Exchange Commission (SEC) 10
Objectives of SEC 10
Function of SEC 11
PART - FOUR
Historical Background of the CSE 12
Mission of the CSE 12
Objectives of the CSE 13
Management 13
CSE at a Glance 14
Trading Hours 15
Procedure of Groupings 15
Categories of Grouping 15
Importance of Grouping 19
Limitation of Grouping 20
Recommendations 20
A few more words about grouping 21
PART - FIVE
Activities of Various Departments 22
Compliance Section 22
Others Sections 22
78
Listing and Membership Department 22
Listing Section 23
Eligibility for Listing 23
Application for Listing 23
Documents to be Submitted 24
Initial Listing Fee 25
Continuous Listing Requirements 26
Membership Section 29
Application for Membership 29
Membership Fee 30
Market Operation Department (MOP) 30
Session Management 31
Pre-Opening Session 31
Opening Session 31
Trading Session 33
Closing Session 33
Odd Lot Trading Mechanism 34
Odd lot orders can be entered for any script in the system. 34
Auction Session 36
Spot Order 37
Bulk Order Trading 38
Circuit Breakers 39
Share Pricing 41
CSE Selective Index (CSE – 30) 42
Criteria for a Selective Index 42
CSE selective index – CSCX 42
Clearing and Settlement Department 43
The following is the Clearing and Flow Chart 44
Clearing & Settlement system of Grouping 45
Flow chart of settlement cycle of A,B & G group shares 46
Accounts and Finance Department 47
Taxation 47
Depreciation 48
R & D Library and P.R. Department 48
Research & Development 49
Library 49
Public Relation 50
PART - SIX
Trading Procedure Types of Trading System 51
Cry Out System 51
Strengths 51
79
Weaknesses 52
Opportunities 52
Difficulties of Cry-out System and Need for Automation 53
Automated Trading System 53
Internet Trading System 55
Steps for trading through Internet 55
Procedures 56
Passwords 57
Know the market on line and offline 57
Placing your order 58
Execution of trade 58
Trade Confirmation 58
Post Trade Settlement 58
PART - SEVEN
Various Committees & its Functions 60
Administrative Committee 60
Finance Committee 60
Human Resource Development Committee 60
Trading Committee 61
Technical And Development Committee 61
Surveillance & Inspection Committee 61
Clearing House Committee 62
Default Committee 62
Attribution Committee 62
Role of CSE in Investment in different avenues 62
Evaluation of CSE 63
Way of using marketing tools by CSE 64
Growth and Development of Listed Securities of CSE. 67
Market Capitalization and GDP of CSE 67
PART - EIGHT
Findings 69
Recommendation 70
Conclusion 71
References 72
80

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PART - ONE

I am grateful to some particular persons who have helped and encouraged

This report concentrates on the overall performance of the Chittagong

The prime purpose of the study is to fulfill the academic requirements of

a) To know the complete history organization and management of

b) To know the activities of various department of CSE,

c) To know about the trading system of CSE,

d) To know about the growth and development of CSE,

e) To know about the problems of stock exchange,

Primary Data are collected through:

Secondary Data are collected through:

As I was involved myself a Chittagong Stock Exchange I know various

Securities and Exchange Commission (SEC):

Historical Background of the CSE:

The Chittagong stock exchange will create an effective, efficient and

Mission of the CSE:

Type of Organization Public Limited Company by

On the vases of the aforesaid information we can say that:

Group ‘B’ companies maintain AGM irregularly, declare higher dividend

Group ‘Z’ companies, maintain AGM irregularly than others, their

Most of them like group ‘A’ because

Some of them like group ‘B’ because

Some of them like group ‘G’ because

Some of them like group ‘Z’ because

The criterion on grouping system is yet to be a matured one. The strength

Activities of Various Departments:

Listing and Membership Department:

Eligibility for Listing:

Application for Listing:

 A brief history of the company since incorporation giving details of

 Copy of Agreement or other documents relating to arrangements

 Certified copies of agreement with Managing Agent, Selling

 A statement containing particulars of materials contracts.

 Form 2 as printed in the listing regulations.

Application for Membership:

Market Operation Department (MOP):

Pre-opening session : 10.00 A.M to 10.20 A.M

Order type Buy/Sell Quantity Price (Tk)

Order type Buy/Sell Quantity Price (Tk)

The volume that could be executed at different price is: -

Thus, the BBO will be formed as follows:

BBO Offer Price BBO Offer Qty Jobber ID

Each odd lot order would have the following elements:

Order type Buy/Sell Quantity Price (Tk)

Order type Buy/Sell Quantity Price (Tk)

Their orders will give the following details:

Bulk Order Trading:

 In case of new issue, free trade may be allowed for first 5

1. At the time of initial public offering

Continuous Trading Index: Calculated considering the trade price of

CSE Selective Index (CSE – 30):

Criteria for a Selective Index:

CSE selective index – CSCX:

Clearing and Settlement Department:

Deliver the net

Receive the Trade Receive the

Deliver the Cherub

FIG: Clearing and Settlement Flow Chart

Clearing & Settlement system of Grouping:

Selling Member Buying Member

Selling Member Buying Member

Accounts and Finance Department: