The Investment Corporation of Bangladesh (ICB) wants a resumption of the complete freedom of trading shares without prior declaration.
The de facto market maker, specially assigned to keep the securities market stable through buying and selling, had been enjoying an exemption from publicly declaring its intention of buying or selling listed securities in applicable cases.
If an investor is a sponsor or director or large shareholder owning a minimum 10 percent shares of a company, that person has to publicly declare his or her intention of buying and selling through the stock exchanges.
Following some unethical practices by insiders of buying and selling without declaration, the securities regulator Bangladesh Securities and Exchange Commission (BSEC) in May 2019 ordered the central depository service provider to keep the non-free-float shares in a blocked module.
Shares that cannot be traded without prior declaration are the non-free-float portion of a company stocks.
The BSEC had also ordered both the stock exchanges not to execute trade orders from the blocked module without proper disclosures.
The ICB along with its subsidiaries were exempted from making disclosures since 2005. But they also got stuck in the automated blocked module, given that they were a corporate director or sponsor or a significantly large shareholder of a listed company.
In October this year, the ICB applied to the BSEC for an exemption from the blocked module so that it can buy or sell shares without prior declaration.
Why the exemption is important
Stock prices and market direction get heavily influenced when everyone follows a large investor.
Like all other large investors, the ICB also needs to keep its buying and selling activities a secret in real-time so that the market is not destabilised, said ICB's Managing Director Md Abul Hossain.
The ICB is a board of over a dozen listed companies, holding significant shares in many companies.
"The ICB needs to buy and sell shares of these companies too for market-making, which is why we applied for the exemption which the ICB had been availing until the blocked module was activated this year," explained Abul.
Responding to ICB's application which was placed last October, the BSEC asked both the stock exchanges to allow the ICB to buy or sell any share without a public declaration.
But a new problem has arisen. Both the exchanges' query format asks the ICB, before it places a sell order, how it obtained the shares. For example, if the share is a primary share or a right share or a bonus share or simply bought from the secondary market.
The ICB this week had again written to the regulator for an exemption from this disclosure to facilitate market support activities.
The format of the stock exchanges is designed to ensure compliances with lock-in period restrictions.
Lock-in period is imposed so that concerned groups cannot pump and dump shares within a short timeframe.
BSEC officials are positive about granting the ICB full exemptions.