The index has recovered. The exchange hasn't

Dhaka's stock market just had its best year in a decade. The DSEX rose 19% in FY26 to close at 5,762, turnover jumped 55%, and by one regional comparison the Dhaka bourse beat every market in Asia except Thailand in the first half of 2026. The recovery is real. The question is what it is running on.

The honest answer: machinery that has barely changed in over a decade. MSCI, the index provider whose classifications guide where global funds put their money, said so politely in its May review, pointing to unresolved problems with market access and changing nothing for Bangladesh. 

Foreign investors said it less politely. They were net sellers for most of the year even as the index climbed. When local investors are buying a rally and foreign investors are selling it, the problem is usually the market's plumbing, not its prospects.

Start with the clearing house. In developed markets, an institution called a central counterparty stands in the middle of every trade. It guarantees that the buyer gets the shares and the seller gets the money even if the other side goes bust. Bangladesh created one on paper — Central Counterparty Bangladesh Limited — back in 2019. 

Seven years later it has never cleared a single trade. Its owners put in around Tk165 crore, and that money has earned more sitting in bank deposits than the company has earned doing its job. Until it works, every trade in Dhaka carries the risk that the other side fails. It also blocks the products that make markets deeper, such as share lending, safer margin loans, and one day, futures and options. None of these can exist without a guaranteed house underneath them.

Settlement is the same story. When you sell a share in Dhaka today, the trade completes two days later. The DSE's managing director has said a joint committee with Bangladesh Bank is working to cut this to one day by December. That deadline deserves support. It also deserves honesty: a faster settlement cycle without a working clearing house makes the system quicker but not safer. The two reforms belong together.

Then there is the market that does not exist at all. Total trading in government bonds on the DSE in the whole of FY26 came to Tk160. Not Tk160 crore. One hundred and sixty taka. The country's entire bond market operates through private deals between banks, out of sight of the ordinary savers and pension funds who should be its natural buyers. 

Meanwhile, what little share trading Bangladesh has is split across two exchanges, one of which frequently trades less in a day than a single mid-sized brokerage house.

I have seen what fixing this looks like, because I helped take a stock exchange public. Russia merged its two competing exchanges in 2011, made the clearing house the commercial heart of the combined group, and then sold shares in the exchange itself to the public in 2013. 

I worked on that listing. Going public changed the institution's behaviour more than any regulation had, because every failure now showed up in its own share price. Pakistan reached a similar answer by a different route when it merged its three exchanges into one national bourse in 2016 to pool liquidity.

Dhaka's to-do list follows from the diagnosis, and the government has already floated pieces of it. First, settle CCBL's fate this quarter — fold it into the DSE as a properly funded clearing subsidiary with one accountable owner, and tie its launch to the December settlement deadline so the two reforms arrive together. Second, complete the merger of the two exchanges into a single national bourse, with CSE shareholders receiving shares in the combined company, so that scarce liquidity stops paying for duplicate systems. Third, and least discussed: commit the unified exchange to selling its own shares to the public within three years and trading on its own board. 

An exchange whose share price punishes every outage and rewards every improvement supervises itself better than any circular can. It would also give Bangladesh the flagship IPO the market has been waiting two years for — one in which ordinary investors could own a piece of the market itself.

The new BSEC leadership has said its priorities are restoring investor confidence and bringing foreign capital back. Rules and enforcement matter to that, and the commission is moving on both. But foreign institutions study the market before they study any company in it. What their checklists read is clearing, settlement, and whether the exchange answers for its own performance. The index has recovered. The task now is to build an exchange that deserves it.

Fahim Chowdhury is an investment banker who has raised over $200bn and executed 500+ capital markets transactions in more than 30 markets. He is currently Managing Director at RetailBook and was previously at Citi. [email protected] 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.