The Bangladesh Securities and Exchange Commission (BSEC) has taken an initiative to reduce the trade settlement cycles on bourses by a day.
Once implemented, investors can sell a share on the very next trading session after their purchase, while currently, they have to wait at least one day in the middle of the buying and selling days.
BSEC Commissioner Shaikh Shamsuddin Ahmed told The Business Standard the regulator is working on the plan as a part of its mission to take the country's capital market to an international standard.
"We are inviting global investors to our market and we need to develop the market infrastructure in line with that," he said.
Right now, a share is not tradable the day after its purchase, which eventually reduces buy-sale orders and the trading volume of the bourses.
"If it can be traded on the next day, the market will have more liquidity and vibrancy," said the BSEC commissioner.
More demand and supply of stock increase the market depth and reduce chances of price manipulation by any dirty groups.
The regulator is in consultation with the bourses and the depository firm and analysing various technical aspects of the needed change. Having the decision finalised, the BSEC will come up with necessary directives, according to Shaikh Shamsuddin.
He said the regulator might go for implementing the change in phases. For example, it may begin with the blue-chip stocks only and gradually add other scrips.
M Shaifur Rahman Mazumdar, chief operating officer of the Dhaka Stock Exchange, said the change is needed, but there are some implementation challenges until the newly formed dedicated central counterparty company CCBL becomes fully operational to clear and settle the transactions on the bourses.
Currently, in the settlement process, the seller's broker gives shares, the buyer's broker pays the money and that has been done through the stock exchanges. The process also includes updating the share ownership data with the Central Depository Bangladesh Ltd (CDBL).
The entire process is taking two days and on the third day, the share becomes sellable.
After the change, the settlement will have to be done at the end of the very trading session and there are some practical challenges that include payment processing through the banking channel on the same day, especially as it will take place after 3pm.
In case of any default by the relevant brokers either to pay the price or give the share on the next day, the stock exchange does it and clears the settlement.
Stockbrokers said, if the market goes for a "T plus 1" settlement from the existing cycle of "T plus 2", bourses would have to do it on the same day. In cases of selling broker's default, technically it would not be possible before the market opens on the next day because the exchange needs to buy the share from the market.
However, the problems need to be solved.
Bangladesh's stock market was a "T plus 3" market until April 2014 when the regulator cut the settlement cycle by one day.
Later, the "Z category" stocks settlement cycle came down to "T Plus 3" from "T plus 9".