The over-the-counter (OTC) market of Dhaka Stock Exchange (DSE), a separate trading section to facilitate the trading of non-listed and de-listed companies, remains sluggish since its launching in 2009, due to complex trading process and ineffectiveness of companies listed on the OTC.
Though the DSE and Bangladesh Securities and Exchange Commission (BSEC) have taken several initiatives to make the OTC market more vibrant, the efforts failed to yield desired results.
Investors are reluctant to trade in the OTC market due to its lengthy and complicated trading process. It usually takes three days to mature a share to exchange in the regular trading floor while it takes 10 days in the OTC market.
According to the DSE data, the market capital of the OTC market is Tk 799 crore with 41 crore shares of 66 companies that had been de-listed from the DSE.Of the companies listed in the OTC market, 11 companies are not currently manufacturing any products while 12 companies did not exchange a single share in last one year. Only 21 out of the 66 firms are maintaining positive earnings per share (EPS) and price earning (PE) ratio in the OTC trading floor.
DSE recently has sent a proposal to the BSEC to form a separate trading board to operate the OTC market for bringing dynamism in the alternative stock market. The proposed system will enable the investors to exchange shares in the OTC market like they do in the regular trading floor. Individual and institutional investors will also be able to buy and sell junk shares in OTC market under the proposed system.
DSE Managing Director Mazedur Rahman said they have planned to make the OTC market more effective. “The investors will get benefited and the companies that have been inactive for long will become active if the OTC market becomes more vibrant,” he said.
The government has launched the OTC market in DSE in 2009 as an alternative stock exchange. The shares of the companies, which were de-listed from the main trading market, are traded on the OTC market.
The OTC started with 51 companies that had been de-listed from the main market for not dematerializing their securities and not providing dividends, making consistent losses and skipping annual general meetings.
Another 29 companies were added to the OTC market in 2010. Investors said that they have shares worth crore taka in the OTC market but the process of this market is complicated.
In the OTC market, a stock dealer or stock broker has to submit the salable securities to the exchange along with a sale order mentioning the name of securities, quantity, rate, last traded price and validity time from 10:00 am to 12:00 pm on each trading day. After receiving the salable securities and sale order, the OTC records the order in the database and provides an official receipt to the respective stock broker or stock dealer. Then the OTC shows the sale order through printed copy that is open for all buyers. OTC market is seller oriented. It provides only pick and choose facilities for the buyers.