Inoperative brokerage firms come under pressure

Bangladesh Securities and Exchange Commission (BSEC) has directed local stock exchanges to make their member brokerage firms that are inoperative to be functional in the capital market.

The regulator came up with the verbal direction in separate meetings with Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE).  

The commission will issue a formal order in this regard very soon.  

A brokerage firm is a member of a stock exchange that provides brokerage services to its clients in the stock market in exchange for fees.

Its main duty is to act as a middleman that connects buyers and sellers to facilitate a transaction.

BSEC officials said the capital market is witnessing a vibrant moment with an increase in indices, trading volume, and the participation of investors but some brokerage firms are still not in operation which is not acceptable.

The regulator wants the firms to become active within a short time and stock exchanges will have to take initiatives in this regard, added the officials.

The officials said the commission has already mounted pressure on brokerage houses to bring down their accumulated loss which is also termed as negative equity.

The commission further directed brokerage firms, especially the members of CSE, to increase their investment in the capital market as some of them have a very nominal investment, added officials.

BSEC has found some brokerage firms of Chittagong Stock Exchange with a few BO accounts only.

The regulator directed the brokerage firms to increase their business volume and the number of customers.

Officials said DSE has 250 brokerage firms and 14 of them are inoperative while CSE has 148 firms and seven are inoperative.

The regulator has recently issued 52 brokerage licences for DSE and 23 for CSE.

Market insiders said some brokerage firms are holding their memberships only to get benefits as the stock exchanges are now profitable organisations. They do not appear interested in investing.

Many DSE brokerage firms get better positions after selling shares to strategic investors but CSE brokerage firms could not sell shares to strategic investors as yet.