The country’s capital market is still stuck on the T+2 share settlement cycle while other capital markets of the world are enabling shareholders to reap the benefits of intra+day trading or T+1 settlement cycle, such as, in India’s capital market since 2022 along with T+0 to T+3 settlement being common in China.
Currently, the T+2 settlement cycle is in operation in the country’s capital market which results in shares being sold within 3 working days since purchase.
Repeated initiatives by the authorities to reduce settlement time to facilitate the development of the capital market and investment have not been implemented. While discussions regarding the initiative have been going on for almost a year, it has not yet seen the light of day.
“An internal discussion meeting of Dhaka Stock Exchange (DSE) held on June 18 discussed this issue,” according to a top stock broker.
The capital market regulator, Bangladesh Securities and Exchange Commission (BSEC) wanted to introduce T+1 (excluding Z category scrips) settlement to increase transactions in the capital market which was to be implemented from the second week of March’22 but it did not happen.
On June 5 2022, BSEC issued letters to Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE) and Central Depository Bangladesh Limited (CDBL) regarding the implementation of the T+1 settlement cycle.
In this regard, DSE Director Shakil Rizvi told The Business Post, “Online banking system is a big obstacle in the implementation of T+1 settlement in the country’s capital market, yet the banking system itself is not yet fully online. Another problem is, it takes three days for the check to be honoured through the account payable cheque process.”
“As a result, if T+1 is introduced, the shares will mature one day earlier which will create uncertainty regarding the brokerage houses getting their sums. Many brokerage houses are opposing this decision due to this issue. Now in Bangladesh’s capital market, one can buy shares and sell them the next day in the spot market. There are no issues in this case. But the process is yet to be implemented in the main markets.
In view of a BSEC order on October 11 2022, an instruction was sent to all the brokerage houses by DSE, which said that the sum of buying shares cannot be collected until the check is encashed. This harmed the capital market.
Investors and brokerage houses put pressure on BSEC to cancel this directive. With the decline in the capital market and the pressure of investors and brokerage houses, BSEC finally decided to restore the previous facility of buying shares by depositing checks with certain conditions. Rashid Investment Services Ltd’s managing director Ahmad Rashid told The Business Post, “The transactions in the country’s capital market and the volume will increase if the T+1 settlement cycle is implemented and will benefit all those involved.
However, capital market analyst Prof Abu Ahmed disagreed and told The Business Post, “There will be no development in the capital market of our country with T+1 settlement. Although, it will be good for the gamblers, but the genuine investors will not be able to enjoy the benefits of the process.”
He also said, “In 1998, shares could be bought in the morning and sold in the afternoon. But due to some complications, this system was cancelled then.”
Executive Director and spokesperson of the BSEC Mohammad Rezaul Karim told The Business Post, “The stock exchanges will decide on this issue. If they feel that implementation of T+1 in the capital market of the country is possible, then the BSEC will surely cooperate.
He also said, “If T+1 is implemented in the country’s capital market, the transactions will increase and it will have a positive impact.”
