A local firm, if not disqualified on some common specific grounds, must invest at least Tk9 crore in total in the form of paid-up capital, security deposit and registration fee to get a stock brokerage licence.
The amount goes as high as Tk16 crore if the applicant company is a foreign-owned one while local-foreign joint ventures are required to invest at least Tk13 crore for availing a brokerage licence from local bourses, says the Bangladesh Securities and Exchange Commission (Trading Right Entitlement Certificate) Rules 2020.
However, the new licence holders will only get a TREC or brokerage licence, not any share or membership of the bourse concerned, according to a gazette for the rules to outline the way for awarding new stock brokerage licences to non-members of the bourses has been published this week.
Earlier this year, the Bangladesh Securities and Exchange Commission (BSEC) published the draft of the TREC Rules which ignited a sense of dissatisfaction among the exchange members, for example the existing brokerage firms.
The initial draft was about to allow new firms in brokerage business with a meagre Tk5 crore divided into paid-up capital, mandatory security deposit and a registration fee.
Following a series of internal debates, Dhaka Stock Exchange (DSE), the oldest and premier bourse, recommended at least Tk10 crore in paid-up capital, Tk5 crore in security deposit and Tk5 crore in registration fees in the middle of the year.
The DSE board was divided into two groups whether the entry barrier in the brokerage industry should be too high or too low.
The DSE board, dominated by independent directors, was even served a legal notice by the exchange members, also the shareholders who want the entry barrier to be higher.
They also have been arguing that, for brokerage business, any firm must have sufficient investment in total for the sake of their commitment to act professionally.
However, BSEC finally comes up with a win-win criterion of keeping the figures in the middle.
According to the gazette, an applicant for TREC must be a registered company with other rational eligibilities like qualifications of directors, skillset.
At the beginning of each fiscal year, the stock exchange will submit its annual plan for issuing new TREC and also the BSEC can instruct the exchanges in this regard.
Following public advertisements inviting applications, scrutinising the applications and other information of the interested firms, stock exchange will have to either accept or reject the applications for new TREC within 45 days.
In cases of rejection, the exchange will mention the reasons in official texts.
TREC will not be transferable and the brokerage industry believes that the condition is a good one to avert applications from firms that are not serious about the brokerage business.