The Bangladesh Securities and Exchange Commission has moved to formulate guidelines on operating index-based exchange traded fund and to scrutinise the Dhaka Stock Exchange’s proposal of launching two index-based ETFs, BSEC sources said.
The BSEC’s moves came at a coordination meeting of the commission held on November 19. BSEC chairman M Khairul Hossain presided over the meeting.
A DSE senior official, however, said that it would not be possible for the bourse to launch ETFs within its target of December this year as the regulator was yet to make required adjustment to the existing rules and regulations.
An ETF is like a mutual fund that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
ETFs experience price changes throughout the day as they are bought and sold.
When an investor is going long in an ETF, he/she is buying shares of a portfolio that tracks the yield and return of its native index.
The BSEC sources said that the coordination meeting also decided to form a committee which will suggest the commission whether formation of ETF is allowed within the existing legal framework or not and whether launching of ETF by the DSE would be allowed or not.
Besides, the committee will also suggest the commission about the necessary adjustment or amendment to the existing rules and regulations in allowing the bourse’s to launch ETFs, they said.
Practice of developed countries in operating ETFs will also be taken into consideration, they said.
The market regulator has made the moves as the DSE in last month at a meeting with the BSEC sought its permission to launch ETFs on December 22 this year when the bourse is scheduled to launch its new trading system.
After the last month’s meeting with the BSEC, DSE managing director Swapan Kumar Bala said, ‘The DSE has made the proposal of launching ETFs in a bid to diversify its business as part of its business plan which was earlier approved by the commission with its demutualisation scheme.’
He also said that the bourse aimed to launch the ETFs by December this year, if the regulator allows, with the introduction of its new trading system.
He said the launching of EFTs might require some fine-tuning to the existing legal framework.
As part of the bourse’s business plan, launching of ETFs is the first priority of the bourse.
The DSE at present facilitates trading of equities, mutual funds, debentures and bonds.
A DSE senior official told New Age, ‘The two ETFs will be formed based on DS30, the blue-chip index of the DSE, and DSES, the Shariah index of the bourse.’
‘The DSE’s responsibility is to prepare the model of the ETFs and provide data of a selective index to the asset management company who will form the fund,’ he said.
The AMC will make the investment into the companies under the indices as per the DSE-provided data or ratio, the official said.
This sort of fund will facilitate investors to get the same return from the companies which comprises the DS30 or DSES by investing the ETFs, he said.
The bourse will make no investment on the fund, he said.
He, however, said that it would not be possible for the bourse to launch ETFs in December this year as the bourse was short of preparation.
The bourse within 2020 aims to attain a sustainable average daily turnover of Tk 25 billion, ensure steady domestic and offshore institutional investments of at least three-fourth of the total investments in the market, the DSE business plan said.
The plan also aims at attaining at least 30 per cent foreign participation of the total market capitalisation, doubling the total number of listed securities, increasing depth and liquidity of bond market, including bringing in the government securities under trading net, and increasing breadth by listing new products.
The BSEC’s moves came at a coordination meeting of the commission held on November 19. BSEC chairman M Khairul Hossain presided over the meeting.
A DSE senior official, however, said that it would not be possible for the bourse to launch ETFs within its target of December this year as the regulator was yet to make required adjustment to the existing rules and regulations.
An ETF is like a mutual fund that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
ETFs experience price changes throughout the day as they are bought and sold.
When an investor is going long in an ETF, he/she is buying shares of a portfolio that tracks the yield and return of its native index.
The BSEC sources said that the coordination meeting also decided to form a committee which will suggest the commission whether formation of ETF is allowed within the existing legal framework or not and whether launching of ETF by the DSE would be allowed or not.
Besides, the committee will also suggest the commission about the necessary adjustment or amendment to the existing rules and regulations in allowing the bourse’s to launch ETFs, they said.
Practice of developed countries in operating ETFs will also be taken into consideration, they said.
The market regulator has made the moves as the DSE in last month at a meeting with the BSEC sought its permission to launch ETFs on December 22 this year when the bourse is scheduled to launch its new trading system.
After the last month’s meeting with the BSEC, DSE managing director Swapan Kumar Bala said, ‘The DSE has made the proposal of launching ETFs in a bid to diversify its business as part of its business plan which was earlier approved by the commission with its demutualisation scheme.’
He also said that the bourse aimed to launch the ETFs by December this year, if the regulator allows, with the introduction of its new trading system.
He said the launching of EFTs might require some fine-tuning to the existing legal framework.
As part of the bourse’s business plan, launching of ETFs is the first priority of the bourse.
The DSE at present facilitates trading of equities, mutual funds, debentures and bonds.
A DSE senior official told New Age, ‘The two ETFs will be formed based on DS30, the blue-chip index of the DSE, and DSES, the Shariah index of the bourse.’
‘The DSE’s responsibility is to prepare the model of the ETFs and provide data of a selective index to the asset management company who will form the fund,’ he said.
The AMC will make the investment into the companies under the indices as per the DSE-provided data or ratio, the official said.
This sort of fund will facilitate investors to get the same return from the companies which comprises the DS30 or DSES by investing the ETFs, he said.
The bourse will make no investment on the fund, he said.
He, however, said that it would not be possible for the bourse to launch ETFs in December this year as the bourse was short of preparation.
The bourse within 2020 aims to attain a sustainable average daily turnover of Tk 25 billion, ensure steady domestic and offshore institutional investments of at least three-fourth of the total investments in the market, the DSE business plan said.
The plan also aims at attaining at least 30 per cent foreign participation of the total market capitalisation, doubling the total number of listed securities, increasing depth and liquidity of bond market, including bringing in the government securities under trading net, and increasing breadth by listing new products.
Source: NewAge
