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Direct listing rules may be changed

Bid to check abnormal price fluctuation

Sarwar A Chowdhury
Direct listing rules of stock exchanges may come under some changes to check abnormal price fluctuation of shares of a company from the very first day of trading under direct listing.
A review committee on the direct listing rules has already made some changes that are to be recommended to Securities and Exchange Commission (SEC) within tomorrowfor its approval.
The review committee has agreed that institutional investors will set the price of shares of a company that will be listed on the bourses under the Direct Listing Regulations.
The institutional investors will have to bid for 10 percent shares of a company for half an hour a day before of the company's trading debut. However, the institutional investors such as merchant banks, mutual funds and stockbro-kers/dealers will have to register with the SEC or stock exchanges for bidding.
Under the present direct listing rules, prices of shares are built up by bidding from the market.
Collecting the bids from both Dhaka and Chittagong stock exchanges, the exchange authorities will fix a weighted average price for general investors.
However, the general investors will not be able to cross a certain limit for buying shares in a single trading day, as the circuit breaker system will remain active from the trading debut.
The institutional investors, who
will bid for shares, will not get shares before one month of trading debut
The review committee also agreed that offering amount of shares under the direct listing rules will have to be offloaded within one month. As per the existing rules, at least 10 percent shares of the offering amount require to be offloaded within one month.
Earlier, the capital market regulator formed the nine-member review committee following abnormal price fluctuations of shares of the last two state-run energy* companies that were listed under direct listing rules.
On the very first day of trading, price of per Jamuna Oil Company share surged to Tk 952 against its face value of Tk 10 only, while the price of per Meghna Petroleum Company share soared to Tk 370 against the face value ofTk 10.
“Such abnormal price fluctuation ultimately affected the investors, and to protect such price fluctuation the direct listing rules are being reviewed,” said a member of the reviewcommittee.
If the SEC agrees in principle to accept the changes in the direct listing rules, process of amendment to the rules will begin soon.
Headed by SEC Member Mansur Alam, the review committee comprises Investment Corporation of Bangladesh Managing Director Ziaul Haque Khondker, SEC executive directors Abdul Hannan Zoarder, Anwarul Kabir Bhuiyan and Farhad Ahmed, Dhaka Stock Exchange (DSE) Chief Executive Officer (CEO)
Salahuddin Ahmed Khan, Chittagong Stock Exchange CEO AB Siddique, IDLC Finance Ltd Managing Director Anis A Khan and AIMS of Bangladesh Managing Director and CEO Yawer Sayeed.
Four state-owned companies — Dhaka Electricity Supply Company, Power Grid Company of Bangladesh, Jamuna Oil and Meghna Petroleum — made debut on the stock markets under direct listing rules since the rules were introduced on June 18,2006.
DSE INDICES FAIT
Meanwhile, indices on the DSE fell yesterday, a day after the SEC slapped a fine of Tk 10 crore on AB Bank's merchant banking wing.
The premier bourse also witnessed decline in turnover and trading volume.
Market insiders said the merchant banks were hesitant to disburse margin loans to the investors for purchasing shares following the market watchdog's regulatory move that forced the investors to sell their scrips at a lower price.
The DSE General Index fell by 36 points, or 1.22 percent, to close at 2900.05 points, while the DSE All Share Price Index declined by 31.58 points, or 1.27 percent, to close at 2447.22 points.
A total of 11442638 shares worth Tk 170.76 crore changed hands on the DSE. Of the issues traded, 49 advanced and 162 declined with eight unchanged.
Earlier on Sunday, AB Bank's merchant banking wing was fined Tk 10 crore for disbursing excess margin loans in violation of securities rules.