Term Paper on MONEY MARKET AND CAPITAL SECURITIES

Submitted to: N. M. Baki Billah

Lecturer

BRAC Business School

Course Name: MANAGEMENT OF FINANCIAL INSTITUTIONS

Course code: FIN 424

Section: 01

Submitted by

Kazi Imran Sharif (14304107)

Mohammad Shihab Shahariar (14304108)

Md.Saifur Rahman (14204007)

Saleh Md. Abu Sinan (14104108)

Kazi Tahrim Khaddem (15104204)

Submission Date: 02 April 2018

i

Table of Contents

Letter of Transmittal....................................................................................................................................ii
Executive summary....................................................................................................................................iii
Acknowledgment........................................................................................................................................iv
Money market.............................................................................................................................................1
T-Bill Progress in Bangladesh.....................................................................................................................2
Capital market.............................................................................................................................................4
Primary market............................................................................................................................................6
Corporate Governance of Compliance.........................................................................................................9
Performance Analysis................................................................................................................................13
Domestic Credit to Private Sector.............................................................................................................13
Narrow money VS Broad money...............................................................................................................14
Contractionary monetary policy................................................................................................................14
Inflation Target:.........................................................................................................................................15
Tools to applied to control money supply..................................................................................................15
Impact of Recently Adopted Policy in Stock Market.................................................................................16
Conclusion.................................................................................................................................................17
References.................................................................................................................................................18
ii

Letter of Transmittal

August 02, 2018

N. M. Baki Billah
Lecturer,
BRAC Business School
BRAC University

Subject: Submission of Term Paper.

Dear Sir,
We are pleased to submit the term paper that you asked for and gave us the authorization to work
on “Money market and capital securities”. This term paper is an essential part of our course and
we tried our best to work on it carefully and sincerely to make the report informative.
The study we conducted enhanced our knowledge of financial institutions to make an executive
term paper. This term paper has given us an exceptional experience that might have immense
uses in the future endeavors and we sincerely hope that it would be able to fulfill your
expectations.
We have put our sincere effort to give this report a presentable shape and make it as informative
and precise as possible. We thank you for providing us with this unique opportunity.

Sincerely yours,

Kazi Imran Sharif (14304107)

Mohammad Shihab Shahariar(14304108)

Md.Saifur Rahman-14204007

Saleh Md. Abu Sinan 14104108

Kazi Tahrim Khaddem 15104204

iii

Executive summary

In this term paper we have tried to gather as much as possible information about Bangladeshi
current money market and capital securities. Money Market an integral part of the financial
market of a country. It provides a medium for the redistribution of short-term loanable funds
among financial institutions, which perform this function by selling deposits of various types,
certificate of deposits and discounting of bills The participants in the money market are: the
central bank, commercial banks, the government, finance companies, contractual saving
institutions like the pension funds, insurance companies, savings and loan associations etc. The
instruments that are generally traded in the money market constitute: treasury bills, short-term
central bank and government bonds, negotiable certificates of deposits, bankers acceptances and
commercial papers like the bills of exchange and promissory notes, mutual funds etc.
iv

Acknowledgment

In performing our term paper, we had to take the help and guideline of some respected persons,
who deserve our greatest gratitude. The completion of this assignment gives us much Pleasure.
We would like to show our gratitude Mr. N. M. Baki Billah Lecturer, BRAC University for
giving us a good guideline for assignment throughout numerous consultations.

We would also like to expand our deepest gratitude to all those who have directly and indirectly
guided us in writing this paper.

Many people, especially our classmates and team members itself, have made valuable comment
suggestions on this proposal which gave us an inspiration to improve our paper. We thank all the
people for their help directly and indirectly to complete our term paper.
 Page 1 of 25

Money market

It is the debt securities that need a maturity one year or less. They generally have a
comparatively high degree of liquidness. Money market securities have a tendency to have a low
estimated return but also a low degree of risk. Various types of money market securities are
recorded below:

Money market Issued by Common Common Secondary

securities investors maturities market
activity
Treasury bills Federal Government Households, 13 weeks, High
firms and 26weeks. 1 year
financial
institutions
Retail certificates Banks and saving Households 7 days to 5 years Nonexistent
of deposit (CDs) institutions or longer
Negotiable Large banks and Firms 2 weeks to 1 year Moderate
certificates of saving Institutions
deposit (NCDs)
Commercial Bank holding Firms 1 days to 270 Low
paper companies, finance days
companies and other
companies
Eurodollar Banks located outside Firms and 1 day to 1 year Nonexistent
Deposit the country government
Banker’s Banks ( exporting Firms 30 days to High
acceptances firm can sell the 270days
acceptance at
discount obtain
funds)
Federal Funds Depository Depository 1 day to 7 days Nonexistent
institutions institutions
Repurchase Firms and financial Firms and 1 day to 15 days Nonexistent
agreements institutions financial
institutions
 Page 2 of 25

T-Bill Progress in Bangladesh

Issuer

Bangladesh Bank (BB), the central bank of Bangladesh, operates throughout the country with its
nine branches. Government takings and payments are supervised and managed Bangladesh Bank
(BB). Where there is no Bangladesh Bank (BB) branch but transactions of government occur,
different branches of Sonali Bank (SB) are allocated to take part in these
transactions on behalf of Bangladesh Bank (BB). These branches are known as 'Chest Branches'.
In a district, there may be one chest and some sub-chests. Bangladesh Bank (BB) directly
monitors Chest branches. This function is known as 'Feed'. The Bangladesh government finances
its expenditures in additional of tax takings through the sale of debt requirements.

Types

Treasury bills are selected by the number of days to their maturity. There are six types of T- bills
that prevail in Bangladesh. These are

a) 28 days T-bill b) 91 days T-bill

c) 182 days T-bill d) 364 days T-bill

e) 2 years T-bill f) 5 years T-bill

Participants

1- Commercial Banks

They need to adjustment their liquidity positions. They participate in the money market because
of their:

 Short-term nature of their liabilities.

 Wide variation in loan demand.
 Legal reserve requirement imposed by the central bank regulation. They sell and buy
different money market instruments to borrow money or to make investment.
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2- The Central Bank

It is the most important participant in the money market. It does not have liquidity problem
because it controls the supply of money. It uses the money market to:

 Conduct its monetary policy through Open Market Operations

 Conduct its discount window operation, where banks can borrow its funds.
 Lend its funds through this discount window (overnight borrowing)

3- The Treasury and Treasury Security Dealers

Government have liquidity problem, because of timing of its expenditure and receipts. It uses the
money market to finance its budget deficit. It also uses the money market to finance its debt,
although most of this is done by issuing long-term securities sold in the long-run capital market.
Treasury security dealers participate in the money market by making market for treasury
securities. They stand ready to sell and buy from the inventories at their own risk.

4- Corporations

They have liquidity problem because of timing of cash inflows and cash outflows. They use the
short-term money markets to adjust their liquidity positions. They use the long-run capital
market to finance investment in capital and new plants.

Who and How Can Invest

Until 2003, there was no secondary market for treasury securities. Any investor whether it may
be institution or individual, who maintains a current account with Bangladesh Bank, can invest in
T-bills through primary market sales. On every Sunday at 11 a.m. at the Motijheel Branch of
Bangladesh Bank sale is held. If Sunday is a holiday, then the last working day before Sunday is
used. All the investors submit their bid unless pension or well-prepared fund. After receiving the
bid, the auction committee decides how much T-bills will be discharged. There is a high-
powered committee to oversee the treasury functions; which includes seven members.
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Capital market

History of capital market

Capital market started in USA at Wall Street in 1653. Then CM came to Mumbai, the
commercial capital of India around 1890. However, in 1970s investment shares rumbled. It took
many years to come to Bangladesh. The origin of stock market in Bangladesh goes back to April
28, 1954. Trading started in 1956. It was titled East Pakistan Stock Exchange Ltd. Then it was
transferred to Dhaka in 1958 and was again renamed as Dhaka Stock Exchange Ltd in 1964.
During the Liberation War trading was postponed. It restarted its operation in 1976 with 9 listed
companies as against 452 today. Formation of Securities and Exchange Commission in 1994
helped capital market to get its momentum in Bangladesh. Chittagong Stock Exchange was
added to the capital market on April 1, 1995. Operation of CSE started on October 10, 1995. The
capital market plays a significant role in the economy of the country.

Regulatory Bodies

The Securities and Exchange Commission was established on June 8, 1993 as capital market
regulator through Securities and Exchange Commission Act, 1993 in Bangladesh. The
compliance of capital market related laws, rules and regulations etc. where ensured by the
commission, the arbitrators, persons and institutions related with the capital market. Basic laws
of the capital market are Securities Act, 1920, Securities and Exchange Ordinance, 1969,
Securities and Exchange Commission Act, 1993 and Depository Act, 1999 Bangladesh Bank.
They exercises powers under the Financial Institutions Act 1993 and also regulate institutions
engaged in financing activities which includes leasing companies and venture capital companies.

Participants in the Capital Market

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The SEC has issued licenses to 27 institutions to act in the capital market. Of these, 19
institutions are Merchant Banker & Portfolio Manager while 7 are Issue Managers and 1(one)
acts as Issue Manager and Underwriter.

Stock Exchanges

There are basically two stock exchanges Dhaka Stock Exchange (DSE) and Chittagong Stock
Exchange (CSE) which generally deals in the secondary capital market. DSE was established as
a public Limited Company in April 1954 while CSE in April 1995. On 30 th June 2000 the total
number of enlisted securities with DSE and CSE were 239 and 169 respectively. Out of 239
listed securities with the DSE, 219 were listed companies, 10 mutual funds and 10 debentures.

The Dhaka Stock Exchange (DSE)

The Dhaka Stock Exchange Limited (DSE) was established in 1954, but it started its commercial
operation in 1956. DSE remained suspended due to nationalization policy trading activities
during the post liberation period and it resumed again in 1976. It is a self-regulatory not-for-
profit organization. DSE supervises the function of listed companies. DSE administration is run
by Dhaka Stock Exchange (Board and Administrations) regulations, 2000. The board of directors
consists of 24 members, 12 directors and is elected by direct votes of DSE members. Twelve
directors are nominated by elected members from NON-DSE members with the approval of the
commission. The Chief Executive Officer (CEO) is also a non-voting member. Commission’s
approval is necessary for hiring CEO of DSE. The CEO conducts the daily affairs of DSE. Now
there are 234 members in DSE of which 194 members are registered by security exchange
commission for conducting securities business. According to the rules every member must be a
corporate body. Transaction and transfer of most of the securities listed on DSE are executed by
electronic form. At presented DSE expanded its on-line trading activities into divisional and
district towns of the country.

The Chittagong Stock Exchange (CSE)

The Chittagong Stock Exchange Limited (CSE) was set up in 1995. It acts as a self-regulatory
not-for-profit organization and its management structure is same as that of Dhaka Stock
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Exchange. The Chittagong Stock Exchange Limited (CSE) started first on-line trading system in
Bangladesh capital market in 1998 and at present it is carrying out trading activities from Dhaka,
Chittagong, Sylhet, Rajshahi, Barisal, Cox’s-Bazar and Khulna.

Compliance Officer

As per the securities laws every intermediary institution has to elect an officer as compliance
officer whose main responsibility is to ensure particular firms agreement with securities laws. As
a primary regulator, if an intermediary does not comply with the laws properly the compliance
officer has to report to the chief officer of the related intermediary. If violation of securities laws
continues then the compliance officer shall report to the commission.

Book Building Method

Book Building Process of IPO pricing is a free pricing rule that values the company on its
performance, both past and future, keeping in mind its investment, earning forecast, economic.

Primary market

Primary market is the market where securities, stocks are selling primarily. For example, a
company needs money for their further business expansion or further investment or even for
increasing production. So from where and how that. Company will get short term money?
Initially the company is private listed company. The company can issue shares to being public
listed company. For this they need to be listed in the stock exchange. They are being listed by
primary market. In the primary market, there is 2 party. One is issuer and the other is investors.
A company can issue shares by being public listed company. If they are in need of cash then they
can issue shares. People, individual, business can buy those stocks from IPO (Initial Public
Offering). They are basically the investors. By purchasing stocks they can holds the authority of
the particular stocks of the company. However the company give dividends in a maturity date.
 Page 7 of 25

So the primary market is that market where the shares are listed in the IPO primarily. It is the
market for new long
term equity capital
where securities are
sold for the first time.

The primary market

also called the new
issues market.

Primary market of Bangladesh: If an individual wants to enter into the share market of
Bangladesh then first they need to open a BO account. A BO account is an account just like a
bank account and it has to be open in a broker house. After that you have to deposit money as
you want and there is no limit of depositing money. However in that moment you have to decide
 Page 8 of 25

where you want

to invest your
money. In the
IPO or in the
secondary
market.
Suppose one
individual wants
to invest in IPO.
New companies. Listed in the Dhaka Stock Exchange for the first time through an IPO. During
an IPO. Lottery period, you need to request for the IPO shares to a broker house and they will
process your request. Within a few days there will be a lottery. If you are lucky then you may
find IPO shares. However if you are not lucky that much then they will refund your money
within days. In Bangladesh, the typical lot size of an IPO is taka 5000. Further you can sell your
shares to the secondary market.

The Secondary Market: This is the market which allows investors to buy and sell existing
securities. Buying and selling transaction exists among the investors. First of all we need to
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understand where there is a need of a secondary market? Yes, we have the primary market
already so where is the need. This is because investors buy long term securities from the primary
market. Basically they lock their money for further dividend. However there is a need of
liquidation of their money. Here comes the secondary market. Investors sell their securities to
other investors who wants to buy them in this market and by this they receive cash. In
Bangladesh the DSE and the CSE is playing the role of both primary and secondary market.

The Selling System: The selling system includes several processes. After the initial public
offering, investors have to open a BO account which is as like as bank account. Then CDBL will
give a 16 digit account number. In that account an investor can deposit money for further buying.
Suppose an investor wants to purchase "ABC" shares. What he need to do is to call for price.
Similar individual who wants to sell shares of "ABC" have to go for bid for his shares. If his
required price match then automatically "ABC" share transfer from sellers account to buyers
account and that person who deposit initial money to his account, provide the required money to
the seller and as usually this process is also automated. This is all about the selling process of
shares and stocks in DSE & CSE in Bangladesh.

Corporate Governance of Compliance

In Bangladesh, corporate governance is still in its primary stage and most of the companies
depend on the banks as their major source of financing. Capital market in Bangladesh is still at
an emerging stage. The neighboring countries are doing well than Bangladesh in terms of depth
of capital market. However, Awareness of the importance of corporate governance in
Bangladesh is growing. Securities and Exchange Commission of Bangladesh issued a
notification on Corporate Governance Guidelines (CG Guidelines) for the publicly listed
companies of Bangladesh under the power vested on the Commission by Section 2 of the
Securities and Exchange Ordinance, 1969. The CG Guidelines were issued on a ‘comply or
explain’ basis, providing some ‘breathing space’ for the companies to implement on the basis of
their capabilities. Nevertheless, the overall framework for investor protection and CG has a
number of important weaknesses that have hindered the capital market development.CG
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practices in Bangladesh is gradually being introduced in most companies and organizations. A

considerable percentage of the top management does not fully understand the concept of CG.
However, Bangladesh has lagged behind its neighbors and the global economy in CG. One
reason for this slow progress in adopting CG is that most companies are family oriented. Such
concentrated ownership structures affects the effectiveness of corporate governance mechanisms,
which weaknesses cannot be rectified by laws and regulations. Motivation to disclose
information and improve governance practices by companies is also felt negatively. There is
neither any value judgment nor any consequences for CG practices. The current system in
Bangladesh does not provide sufficient legal, institutional and economic motivation for
stakeholders to encourage and enforce CG practices.

Corporate ownership structures

There are around four core principles of corporate governance: Fairness, accountability,
responsibility and transparency. The specific challenges of upholding these principles depend on
the ownership structure of the corporate sector. However, in Bangladesh, general practice is that
the corporate structure is dominated by family members. Such practice hinders the level of
fairness, accountability and transparency.

Inadequate Bankruptcy Laws

 Bankruptcy laws and processes are inadequate in Bangladesh. No country can have good CG
standards with poor bankruptcy laws and processes. Besides, inefficient foreclosures and
securitization processes have compounded the problems in Bangladesh.
 
Limited or No Disclosure regarding Related Party Transactions
Related party transactions are not disclosed properly in the financial statements. It is an
impediment towards achieving good CG in Bangladesh.

Weak Regulatory System

Bangladesh still follows the legal system inherited from the British administration. The other
significant laws which has important role in governing the corporate sectors are: Securities and
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Exchange Ordinance 1969, Bangladesh Bank Order 1972, Bank Companies Act 1991, Financial
Institutions Act 1993, Securities and Exchange Commission Act 1993 and the Bankruptcy Act,
1997. Here, weak regulatory system along with board interference with the management retards
the improvement of CG in the country.

Capital Market Role

Capital market facilitates good governance through information production and monitoring. The
capital market of Bangladesh consists of two stock exchanges: Dhaka Stock Exchange (DSE)
and Chittagong Stock Exchange (CSE). Bangladesh does not have depth in its equity market.
Besides, there is no development of Bond market. The capital market of Bangladesh is still a
weak link in the movement towards strengthening CG. The overall performance measures of its
stock market show low trading volume, intermittent bumps, not many new offerings and
unsteady valuations more on the declining side than otherwise. Recent stock market scandals
have seriously eroded investor confidence in the stock market. One vital aspect is that capital
market in Bangladesh does not react significantly to corporate performance in terms of higher
stock valuation for accurate disclosure and poor stock price for failure of accurate and full
disclosure. There is little incentive in becoming a public company and listing on the stock
exchange in Bangladesh. Companies with good reputations can get bank financing relatively
easily than through share issue. Moreover, there are no bonds, fixed income or debt instruments
in the capital market. This means there are no pressure groups for enforcing CG principles.
Unlike the private mutual funds, the state-owned investment Company – Investment Corporation
of Bangladesh (ICB) – has not, until recently, been required to publish the net asset value of its
mutual funds or submit performance reports to the SEC.

General Meeting Scenario

Annual General Meeting (AGM) is the primary platform where shareholders can raise their
concerns and make their influence felt over the management towards attaining good governance.
Although a good number of provisions in the Act provided sufficient leverage to allow
shareholders a voice in companies, most companies in Bangladesh, are closely held. Small
groups of shareholders own or control the majority of shares, and by using that majority, control
the decision making processes of the companies
 Page 12 of 25

Board Committees
Board committees are of critical importance in CG. Audit Committee is now being treated as a
principal player in ensuring good CG. The main role of Audit Committee, are: monitoring
integrity of financial statements, reviewing internal financial controls, recommending
appointment of external auditor and reviewing auditor independence and objectivity and audit
effectiveness. The Remuneration Committee’s responsibilities include establishment and review
of the Managing Director’s remuneration package and senior management salary packages.

The Boards of Directors

The boards of directors are actively involved in management. Most independent directors
represent current or former government officials or bureaucrats. They are appointed directors to
assist company in getting licenses or as payback for previous favors. In the context of
Bangladesh, independent directors do not act as an advocate for minority shareholders or as a
source of innovative ideas.

Lack of Shareholder’s Activism

Shareholder rights are today recognized across the globe as relevant to efforts for improving and
strengthening CG. The number of shareholders with sufficient knowledge and skills to
understand company operations and to hold management and the board of directors accountable
is very low. As a result there is very little awareness about shareholders’ rights and
responsibilities. Shareholders’ activism is still an illusion in Bangladesh.

Market for Corporate Control

A market for corporate control plays an important monitoring function in CG. In Bangladesh,
there seems to have less initiative market for corporate control. Recently, Bangladesh Bank &
SEC are trying to regulate the code of corporate governance in the listed companies.

Weak Pressure Groups

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As shareholders, investor associations, institutional investors and the financial press are weak in
Bangladesh they can’t play significant role in ensuring better CG by creating pressure. The
numbers of journalists who possess knowledge on financial reporting are limited and there are
lacks of investigative reports. Similarly public shareholders are unorganized under a common
platform to demand better corporate governance.

Lack of Auditor Independence

Auditors in Bangladesh are not considered independent and they have some fiduciary or
financial relationship with the management. Most of the time we see the issue unqualified reports
A study shows that most of the companies conduct regular audit for effective implementation of
the core labor policies.

Poor Audit Report

Audited financial reports are not reliable and free from the influence of the owners. Despite
irregularities in the audit report, the auditors issue unqualified audit report on the financial
statements.

Performance Analysis

Dhaka Stock Exchange

The financial performance during the year 2016-17 was improved mainly due to increase of
Transaction income. In the financial year 2016-17 the Exchange made a net income of Tk. 1,239
Million. This is an increase of 3.42 percent compared to 1,198 million recorded in 2015-16. Fees
and non-interest income of the Exchange however recorded an increase from Tk. 800.24 million
to Tk. 1,211.63 million over the preceding year.
Chittagong Stock Exchange
 Page 14 of 25

The key operating financial performance from 2016-17 that operating profit has increased
significantly from the previous years. Return has increased by approximately 70% from the
previous year. Which also contributes to the increase of EPS from .32 to .55.

Domestic Credit to Private Sector

Domestic credit to private sector generally refers to financial resources provided to the private
sector, such as through loans, purchases of non-equity securities, and trade credits and other
accounts receivable, that establish a claim for repayment. For some countries these claims
include credit to public enterprises.

Generally in Bangladesh the domestic credit is not associated to public sectors but is associated
to the private sectors

Domestic credit to private sector (% of GDP) in Bangladesh was reported at 44.45 % in 2016,
according to the World Bank collection of development indicators, compiled from officially
recognized sources. It is shown below through a graph,

Narrow money VS Broad money

 Page 15 of 25

Narrow money is that type of money supply that includes the all types of physical money such
as coins and taka. On the other hand broad money is a measure of money supply that includes
more than just physical money. It includes demand deposits, saving deposit etc. We can easily
liquid narrow money in a short time because it is extremely liquid but we can’t liquid broad
money in a short time as narrow money. Broad money takes some time to make liquid. The
narrow money supply represents the extremely liquid financial assets on the other hand broad
money represents the very liquid assets. Example of narrow money is cash, debit card etc. and
example of broad money is saving deposit, time deposit etc. Total narrow money in Bangladesh
is 2337897 BDT Million in December 2017 and total board money is $132.1 billion in December
2017.

Contractionary monetary policy

Monetary policy is the process by which the Central Bank of a country controls the supply of
money, set a rate of interest for the purpose of promoting economic growth and stability. The
main objective is usually includes relatively stable prices and low unemployment. At this current
fiscal year Bangladesh is following contractionary monetary policy to control the supply of
credits and inflation in a bit to maintain economic stability, according to officials. As
contractionary policy expands the money supply more slowly than usual, it is expected that the new
monetary policy will ensure the price stability and achieve public trust. Contractionary policy is
intended to slow inflation in order to avoid the resulting distortions and deterioration of asset
values.

Inflation Target:
Inflation target is the target for inflation setting by the government to either increase or decrease
the inflation rate of a country. To maintain a sustainable GDP growth, every country set their
inflation target in every fiscal year. Currently the inflation target rate of Bangladesh is 5.5% to
aiming the GDP growth at 7.4% in the fiscal year of 2017-18. According to Mr.Fazle kabir
(governor of Bangladesh Bank) the inflation rate of the last fiscal year was 5.4%, against pre-set
targeted of 5.8%.
 Page 16 of 25

Tools to applied to control money supply

1. Print More Money

As no economy is pegged to a best quality level, national banks can expand the measure of cash
available for use by essentially printing it. They can print as much cash as they need, however
there are results for doing as such. Simply printing more cash doesn't influence the yield or
creation levels, so the cash itself turns out to be less profitable. Since this can cause swelling, just
printing more cash isn't the main decision of national banks.

2. Set the Hold Necessity

One of the essential techniques utilized by every single national bank to control the amount of
cash in an economy is the save prerequisite. Generally speaking, national banks order safe
foundations to keep a specific measure of assets available for later against the measure of net
exchange accounts. At the point when the national bank needs more cash coursing into the
economy, it can decrease the save necessity. This implies the bank can loan out more cash. On
the off chance that it needs to lessen the measure of cash in the economy, it can expand the hold
necessity. This implies banks have less cash to loan out and will along these lines be pickier
about issuing advances.

3. Impact Loan costs

As a rule, a national bank can't straightforwardly set financing costs for advances, for example,
contracts, vehicle credits, or individual advances. Notwithstanding, the national bank has certain
instruments to push financing costs towards wanted levels. At the point when banks get the
opportunity to obtain from the national bank at a lower rate, they pass these funds on by
lessening the cost of advances to its clients. Lower loan fees tend to expand obtaining, and this
implies the amount of cash available for use increments.

4. Take part in Open Market Activities

National banks influence the amount of cash available for use by purchasing or offering
government securities through the procedure known as open market activities (OMO). At the
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point when a national bank is hoping to build the amount of cash available for use, it buys
government securities from business banks and establishments. This authorizes bank resources—
they now have more money to credit

Impact of Recently Adopted Policy in Stock Market

Since the large stock market policy correction in 2010-11, market liquidity measured by the DSE
turnover doubled since 2016, recording the highest in 2017. Stock market prices measured by the
DSE board index (DSEX), rose by more than 10 percent and 24 percent since June 2017 and
December 2016. The buoyant trading activities benefited from participation by overseas investor
and positive microeconomics outlook. While BSEC oversees the capital markets, Bangladesh
Bank’s surveillance of statutory limits of capital market exposure contribute to capital market
development agenda and financial stability.
 Page 18 of 25

Conclusion

The money market in Bangladesh is in its transitional stage. The various constituent parts of it
are in the process of formation, while continuous efforts are being made to develop appropriate
and adequate instruments to be traded in the market. At present, government treasury bills of
varying maturity, Bangladesh Bank Bills and Certificates of Deposits etc. in limited supply are
available for trading in the market. However, the short-term credit market of the banking sector
experienced a tremendous growth since liberation. In 1999, a total of about 6000 branches of the
scheduled banks provided short-term credit throughout the country in the form of cash credit,
overdraft and demand loan. The rates of interest are determined by the individual banks and as
such the market is quite competitive. Each bank maintains its liquidity and supply of fund is
arranged throughout the country with the help of an interconnected network of branches.
Bangladesh bank as central bank of the country exercises its role in this market through the use
of instruments such as bank rate, open market operations and changes in statutory liquidity
requirements.
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References
Dhaka Stock Exchange Indices Information. Retrieved from https://goo.gl/kGxo97

Chittagong Stock Exchange Indices Information. Retrieved from https://goo.gl/4JD6uL

Chittagong Stock Exchange Performance Information. Retrieved from: https://goo.gl/w4yeM2

Chittagong Stock Exchange Background. Retrieved from https://goo.gl/sJNnfG

Dhaka Stock Exchange Background. Retrieved from https://goo.gl/AKsVSK

Dhaka Stock Exchange Algorithms. Retrieved from https://goo.gl/XdUaAC

Chittagong Stock Exchange Algorithms. Retrieved from: https://goo.gl/jmMtpK

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2007)
2. “Corporate Governance in Bangladesh: Link between Ownership and Financial Performance”,
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Implementing the G20 Recommendations for Strengthening Financial Stability-Report on the
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http://www.assignmentpoint.com/business/finance/describe-trading-system-of-dhaka-stock-
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http://www.dsebd.org/settle.php

https://m.investing.com/equities/bangladesh

https://www.researchgate.net/publication/228122637_E-
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http://www.midwaybd.com/blog/basics-of-share-market-explained

https://tradingeconomics.com/bangladesh/domestic-credit-to-private-sector-percent-of-gdp-wb-
data.html
https://tradingeconomics.com › Countries › Bangladesh

https://www.investopedia.com/terms/n/narrowmoney.asp