FE Report (January 18, 2011)
The Securities and Exchange Commission (SEC) has urged the institutional investors including brokerage firms and merchant banks to be responsible for the sake of a sustainable stock market, officials said.
The regulatory advice comes after some institutional investors have behaved like retailers in selling shares in the volatile market, which resulted in the retail investors being more panicked.
The top officials of the SEC Monday sat two times with the representatives of merchant banks and brokerage firms in a move to deal with the unrest in the stock market by way of responsible behaviour of institutional investors.
"The responsibility of institutional investors is more crucial than that of retail investors," an SEC official said.
"But unfortunately, some institutional investors have also behaved like retailers with many retailers following them in triggering a panic in the stock market," he said.
"That's why we have urged them to be more responsible so that retailers can overcome their shaky state of mind and the market returns to a stable situation," he added.
At the meeting, the SEC discussed the overall situation of the market and urged the merchant bakers to increase the amount of margin loan for increasing the purchase power of their clients.
The merchant bankers said that they could not provide sufficient amount of loans as many of them have already been subsidised by their parent companies.
In such a situation, it will be easier to increase the amount of margin loans if Bangladesh Bank (BB) relaxes its directive regarding the fixed amount of loans for merchant banks and brokerage firms, the merchant bankers said.
The SEC said in its reply that the regulator has already talked to BB to overcome the liquidity crisis in the stock market and that every day the central bank is lending a significant amount of money to the banks thorough Repo. At the same time, the condition on loan-limit has also been relaxed for the subsidiary firms of commercial banks, it added.
The SEC stressed responsible behaviour by the institutional investors so that they do not increase sell pressure in the volatile market.
According to sources, some brokerage firms sold a large amount of shares on Sunday. Even they have sold good-fundamental shares at lower prices, which spread a panic in the market and the benchmark DSE general index (DGEN) lost 4.10 per cent or 312 points in the mid-session of Sunday's trading.
Before the trading session, the SEC got tips that some rouge elements could play a role in bringing the market down. Against this backdrop, SEC chairman Ziaul Haque Khondker and member Muhammad Yasin Ali were seen present in the surveillance room at the SEC office throughout the trading session to closely detect the machinations disturbing the market.
However, finally the DGEN recovered 171 points and the market closed its session with a loss of 141 points mainly riding on the purchase by the state-owned investment bank, Investment Corporation of Bangladesh (ICB).
On the day, the ICB bought the shares worth Tk 2.29 billion with the support of Bangladesh Bank.
An SEC official said the regulator is monitoring the activities of institutional investors.
"The SEC will take action against any firm if the regulator finds it engaged in foul play," he said
The Securities and Exchange Commission (SEC) has urged the institutional investors including brokerage firms and merchant banks to be responsible for the sake of a sustainable stock market, officials said.
The regulatory advice comes after some institutional investors have behaved like retailers in selling shares in the volatile market, which resulted in the retail investors being more panicked.
The top officials of the SEC Monday sat two times with the representatives of merchant banks and brokerage firms in a move to deal with the unrest in the stock market by way of responsible behaviour of institutional investors.
"The responsibility of institutional investors is more crucial than that of retail investors," an SEC official said.
"But unfortunately, some institutional investors have also behaved like retailers with many retailers following them in triggering a panic in the stock market," he said.
"That's why we have urged them to be more responsible so that retailers can overcome their shaky state of mind and the market returns to a stable situation," he added.
At the meeting, the SEC discussed the overall situation of the market and urged the merchant bakers to increase the amount of margin loan for increasing the purchase power of their clients.
The merchant bankers said that they could not provide sufficient amount of loans as many of them have already been subsidised by their parent companies.
In such a situation, it will be easier to increase the amount of margin loans if Bangladesh Bank (BB) relaxes its directive regarding the fixed amount of loans for merchant banks and brokerage firms, the merchant bankers said.
The SEC said in its reply that the regulator has already talked to BB to overcome the liquidity crisis in the stock market and that every day the central bank is lending a significant amount of money to the banks thorough Repo. At the same time, the condition on loan-limit has also been relaxed for the subsidiary firms of commercial banks, it added.
The SEC stressed responsible behaviour by the institutional investors so that they do not increase sell pressure in the volatile market.
According to sources, some brokerage firms sold a large amount of shares on Sunday. Even they have sold good-fundamental shares at lower prices, which spread a panic in the market and the benchmark DSE general index (DGEN) lost 4.10 per cent or 312 points in the mid-session of Sunday's trading.
Before the trading session, the SEC got tips that some rouge elements could play a role in bringing the market down. Against this backdrop, SEC chairman Ziaul Haque Khondker and member Muhammad Yasin Ali were seen present in the surveillance room at the SEC office throughout the trading session to closely detect the machinations disturbing the market.
However, finally the DGEN recovered 171 points and the market closed its session with a loss of 141 points mainly riding on the purchase by the state-owned investment bank, Investment Corporation of Bangladesh (ICB).
On the day, the ICB bought the shares worth Tk 2.29 billion with the support of Bangladesh Bank.
An SEC official said the regulator is monitoring the activities of institutional investors.
"The SEC will take action against any firm if the regulator finds it engaged in foul play," he said
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