DSE recommendations for new Trec Rule
- Tk10 crore of paid-up capital
- Tk5 crore in non-refundable registration fee
- Tk5 crore as refundable security deposit
- Tk10 lakh as application fee
- Tk1 lakh as annual Trec renewal fee
The Board of Directors of the Dhaka Stock Exchange (DSE) have finally agreed to recommend much tougher criteria for awarding new brokerage licences and these will be communicated to the securities regulator next week.
After two consecutive board meetings, directors of the premier bourse on Wednesday came to a consensus on recommending Tk10 crore of paid-up capital, Tk5 crore of non-refundable fees for new brokerage registration, Tk5 crore in refundable security deposits, Tk10 lakh for each application form to avail a new brokerage licence and Tk1 lakh as annual brokerage licence renewal fee.
The recommendations are feedback on the proposed new Trading Rights Entitlement Certificate (Trec) Rules intended to pave way for non-member firms to be in the brokerage business.
Initially, the draft Trec Rules by the Bangladesh Securities and Exchange Commission (BSEC), published on March 25, had suggested that paid-up capital of only Tk3 crore would be enough to avail a Trec – only a brokerage licence, not membership or shares of the exchange company.
The draft had proposed the registration fee to be Tk5 lakh only alongside a security deposit of Tk2 crore and an application fee of Tk1 lakh.
The exchange directors were apparently divided into two groups in terms of raising the bars for new entrants in brokerage business higher or lowering it.
However, recent settlement failure by a DSE brokerage firm Crest Securities has encouraged both groups to recommend tougher criteria.
The first board meeting to discuss the issue was on June 2, at which the directors reached an interim consensus to recommend Tk10 crore paid-up capital, Tk2 crore as registration fees, Tk3 crore in security deposits and Tk10 lakh in application fees.
Finally, the security deposit and the registration fee have been further raised in the second board meeting.
The BSEC will take notes from the stakeholders' feedback and finalise the Trec rule.
Capital sufficiency and some strong criteria for allowing operations of the brokerage firms in the coming days are necessary to avert trade settlement risks, believe experts.
They also believe that along with ensuring a strong capital base for the new entrants, strengthening the existing brokerage firms' capital base is necessary.
Sources said the DSE is planning to gradually increase their member firms' capital base within the next two years.
Last year, the BSEC published the risk-based capital adequacy rules for capital market intermediaries including brokers, dealers, merchant banks, asset management companies and other firms like credit rating agencies.
Most of the existing brokers – nearly 250 – at the DSE are yet to ensure their capitalisation as outlined in the rule, which is yet to be implemented mainly because of the depressed condition of the market.
According to the rule, a stockbroker would need at least Tk5 core of capital against general stock broking and the figure will go as high as Tk15 crore if the broker wants to be in full-fledged operation as stock broker and stock dealer.
Member firms, who inherited their brokerage licence against their shares at the exchange company, will have to comply with the capitalisation rule in the coming years to be in business.