Want to build DSE as a fintech firm: MD

Tarique Amin Bhuiyan, who has recently taken charge as managing director of the Dhaka Stock Exchange (DSE), has expressed his desire to develop the country's premier bourse as a modern and IT-based organisation.

A man with a strong IT background, he shared his detailed plans in an exclusive interview with Ahsan Habib Tuhin, Staff Correspondent of The Business Standard on Thursday.

He spoke about the use of technology in the stock exchange, problems in foreign investments, listing of companies and unethical practices by stakeholders.

Why did you choose to take the helm of DSE despite being an IT specialist and entrepreneur?

I was very surprised to see the recruitment circular for the position of managing director of the DSE because it stated that those who have experience in studying and working with information technology will be given priority. Since I have knowledge and experience in this field, I thought I should apply for the position.

Did you make any plan or strategy before taking charge?

Look, stock exchanges in many countries are operating as fintech companies. For example, the London Stock Exchange Group and even the Bombay Stock Exchange are running successfully as fintech firms. They are providing IT services to various listed companies with a fintech wing.

So seeing the recruitment circular, I felt that the DSE board wanted to build the country's premier bourse by hiring a tech expert. I have also mentioned in my resume that I want to run the DSE with specific fintech thinking.

Would you explain your plans or strategies in detail?

I started working on the "Five Ps" strategy to build the DSE as a fintech organisation. The "Five Ps" are people, platform, products, process and policy. Again, we have set the technological upgradation strategy based on each "P".

Here 'people' means the staff of the DSE, listed companies, brokerage firms and investors. First of all, we have emphasised paperless information exchange and correspondence between staff and stakeholders. For this, a software called "Paperless@DSE" has been developed in India. Initially, the software will be launched among our staff in January. It is very difficult to work with e-mail and letters on paper. Now our target is to extend this software to brokers, listed companies and the Bangladesh Securities and Exchange Commission (BSEC).

There is no intranet – private networks used by organisations to distribute communications exclusively to their workforce – communication between us. Due to a lack of intranet, most of our work has to be done through email or social media. It does not guarantee the security of an organisation.

On the other hand, we have no presence on social media like Facebook, LinkedIn and Twitter. A department will be set up for this. Its job will be to highlight our products and activities on social media. It will increase the speed and transparency of our work to ensure more services to investors.

But investors still have problems with our trading platform. Why is that?

Our trading platform is using a Nasdaq-matching engine and an order management system from a French company. But the order management system has a limit to our daily transactions. The transaction volume at the DSE does not put much pressure on the current limit. However, this management system needs to be further improved.

The current system's license is valid until 2024. Changes will be considered after the date of expiry of the licence. Meanwhile, we have a Chinese consortium of the Shanghai Stock Exchange and Shenzhen Stock Exchange as our strategic partner. It is using the world's latest technology. We have an offer of good technical support from the strategic partner. In particular, we are working on how we can take their matching engine and surveillance system. I think it would be better for us to work with more technical support from Chinese organisations.

We have not yet been able to attract potential foreign investment to the stock market...

Foreign investment is currently less than 5% of DSE's market capitalisation. In the beginning, foreign investors face difficulties in opening a Non-Resident Investors Taka Account (Nita). This has become a problem for potential foreign investors. Foreign investors have also raised questions about the issue at various roadshows organised in different countries by the BSEC. The securities regulator, led by its Commissioner Dr Shaikh Shamsuddin Ahmed, is working on a priority basis to resolve the issue.

Banks have a big role to play here since Nita accounts are maintained by them. After opening such accounts, foreign investors again have to create an account in the brokerage firm and the central depository to trade their shares. Therefore, we have suggested bringing these three processes together. The BSEC has agreed to my proposal and given the DSE the responsibility to develop a common process, which is now a big challenge for us.

Taxes are another big challenge for foreign investors. We have 30% dividend tax and 20% capital gains tax. Due to low foreign investment, the National Board of Revenue (NBR) does not get much tax. If reduced, foreign investment will increase. Even if the tax rate is reduced, revenue will increase.

There are many complaints about the DSE mobile app. How are you resolving these issues?

We have weaknesses in the mobile app due to dependence on vendors. For this reason, the problems that occur are not being solved very quickly. We want to develop it ourselves. So we are discussing with our order management system and matching engine vendors on how to get data support. Work on app development will start soon.

There will be another benefit if we give SDK (Software Development Kit) accounts to banks that can integrate the DSE app with their apps.

This will allow any customer to give investment instructions through using our app from within the bank apps. 

There are few investment tools at our stock exchanges. What are your plans?

We have already successfully started bond transactions. We are also working on other products. Hopefully, by February or March, we will be able to launch the Exchange Traded Fund (ETF) – a basket of shares of many companies. As a result, many foreign investors will be interested in investing here. Besides, there are many investors who can't pick shares in a knowing way; they will get good returns by investing here. As the index rises, the ETF share price will go up. And it's a good way for long-term investments. We should have launched this ETF a long ago.

In the future, we will introduce derivatives. But a lack of people with knowledge of derivatives is a problem. On the other hand, the Chittagong Stock Exchange (CSE) has already launched a commodity market. We will also do it. But without technology, we cannot introduce good products.

What are your plans on increasing the number of companies on the stock exchange?

We have already organised a seminar to encourage companies to get listed on the stock exchange. More such meetings will be arranged. Different sectors or companies have different problems. So we will sit one-on-one with sector-based companies like pharma and textiles.

A seminar on start-ups will be held at the end of January where we will discuss how to finance them.

We will organise another seminar in March together with the CSE to attract companies in Chattogram.

It will be a good achievement for us if 15 out of 100 companies which have already been invited get listed on the market.

Many stockbrokers and listed companies are engaging in unethical practices, as a result of which investors are suffering losses. What is your plan to do away with such malpractices?

The BSEC and DSE are working to curb malpractices by listed companies and brokerage firms. The present commission has been able to send out the message that such practices will not be allowed to continue. But now the big brokerage firms and companies are doing well because they know businesses cannot survive without good governance. Moreover, the proper implementation of our "Five Ps" strategy will reduce the chances of unethical practices.