Star Business Report
The Securities and Exchange Commission (SEC) will not allow paper shares to trade on the main boards of stock exchanges from October, a move meant to ensure a smooth and transparent trading system.
The SEC yesterday took the decision, as paper shares are not compatible with the electronic trading system. The new system will also help eliminate any fake share from trading.
As an earlier step, the regulator will not let paper shares trade under B-category from July. The issues with paper shares will be downgraded to Z-category, an area of junk stocks.
The SEC banned the trading of paper shares in A-category in January. It means all listed companies will have to convert paper shares into electronic ones.
Of the 51 companies with paper shares, 29 trade in B-category. Paper shares take up only 0.78 percent of the total market capitalisation on Dhaka Stock Exchange.
The decision was taken at a meeting presided over by SEC Chairman Ziaul Haque Khondker.
"Paper shares create problems in settlement in an electronic system," Mansur Alam, SEC's member, told reporters after the meeting.
"It will bring the highest level of transparency to the trading system, as all processes will be completed electronically," he said.
He however said the commission would determine later the fate of the companies that will miss the deadline.
The electronic trading system started in Bangladesh in January 2004 with the introduction of central depository system (CDS), the alternative to trading of paper-based stocks.
Central Depository Bangladesh Ltd (CDBL), the service provider company, operates the CDS and it has already gained popularity among investors, as the electronic trading settlement system eliminates the risk of fake or soiled shares.
At yesterday's meeting, the SEC brought some changes to mutual fund rules.
From now, an individual can get Tk 10 lakh worth units of a mutual fund under pre-IPO private placement, while a non-listed firm will be allowed to have Tk 1 crore worth units. Listed companies and other mutual funds can receive Tk 5 crore worth units each.
Other than banks, non-bank financial institutions, insurance companies and registered companies, no organisations can be sponsors for a mutual fund floatation.
The sponsors' lock-in will be for two years, meaning the sponsors cannot sell their units within two years of a fund floatation.
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