BSEC conditionally approves share trading on cheque

The stock regulator, Bangladesh Securities and Exchange Commission (BSEC), has backtracked from its previous move and conditionally allowed the share trading against bank cheques before encashment.

The securities regulator on Tuesday passed a new order allowing the stockbrokers and merchant banks to trade stocks on back cheques before encashment.

Earlier on October 11 last, the BSEC had asked the stockbrokers not to trade shares against bank cheques before encashment.

According to the first condition of the BSEC’s newly issued directive, brokerage firms or merchant banks must deposit bank cheques to banks on the same trading day or the following day for their encashment.

But if they fail to comply, they would not be allowed to be an eligible investor for any IPO proceeds for the next year.

Secondly, if the bank cheques bounce back at the time of its deposit, the stockbrokers or merchant banks concerned must pay the amount to the bank. If they fail here, they would also not be allowed to be an eligible investor for any IPO offer in the next year.

The third condition was served to the investors. According to this term, if an investor’s bank cheque is bounced, he or she would be banned from buying or selling stocks in the markets for the next year.

Besides, stockbrokers must submit the list of non-compliant cheques within 10 working days after the end of a month.

The DSE, CSE, all the stockbrokers, and merchant banks were asked to fulfill these directives in due course, the BSEC order read.

When the BSEC last issued the previous order last month, it cast a shadow over the investors’ sentiment, and subsequently, the markets continued suffering for many consecutive trading sessions.

The volume of transactions in the capital markets had also started dipping right after the issuance of the order.

Following the downward market trend, the capital market participants, mainly the DSE Brokers Association of Bangladesh (DBA) and Bangladesh Capital Market Investors Association, requested the BSEC to backtrack on its decision that deters them from purchasing shares against bank cheques before encashment. 

They also said if the instructions on the cheque encashment issue were not withdrawn, it would put an ominous impact on the progress of the country’s capital market.