BSEC for allowing TREC to foreign firms

FT ONLINE

The securities regulator has moved to issue fresh TREC (Trading Right Entitlement Certificate), to any firms, including foreign ones, for conducting trading operations in the country's capital market.

The officials of the Bangladesh Securities and Exchange Commission (BSEC) said the move came in line with the demutualisation act which said the TRECs will be opened after five years of completing the exchanges' demutualisation process.

"Five years of completing the exchanges' demutualisation process has already passed. More value will be added to trading operations if new firms, including foreign ones, are allowed to conduct trading operations in the capital market," a BSEC official said preferring anonymity.

He said many foreign companies having relation with foreign investors are running business in this country.

"Any investor feels better to conduct business through his/her familiar operator. In that case, more foreign portfolio investors will be interested to invest in our market if foreign firms get TREC," the BSEC official said.

He said the objective of issuing new TREC is also to allow eligible local firms in conducting trading operations.

As part of its move, the securities regulator has formulated the draft rules and has already sought opinions on it from both the bourses and DSE Brokers Association (DBA).

Presently, there are 250 TREC holders in the DSE while 148 TREC holders are conducting trading operations in the Chittagong Stock Exchange (CSE).

The existing TREC holders are also the shareholders of the stock exchanges. The fresh TREC holders, if allowed, will only be allowed to get license for conducting trading operations in the capital market.

The draft rules titled 'Bangladesh Securities and Exchange Commission (Trading Right Entitlement Certificate) Rules, 2019, said a firm having technical infrastructure and human resources, among others, should have a paid-up capital worth Tk 50 million to conduct trading operations.

The condition is that the net asset value of the firm must be 75 percent of its paid-up capital.

"No director of the brokerage firm formed under fresh TREC can hold another TREC and no joint investment schemes including mutual funds can be the shareholders of it," the draft rules said.

Asked, the president of DSE Brokers Association (DBA) Sharif Anwar Hossain said the number of TREC holders is higher in Bangladesh compared to that of other countries.

"Nevertheless, new TRECs can be issued, if required, to diversify the country's capital market," Mr. Hossain said.

He said as per the act the number of TRECs can be increased within five years of completing demutualisation process by taking a special decision at the meeting of the exchange's shareholders.

He said the DBA is working to prepare its opinion on draft rules formulated by the BSEC to issue new TRECs.

Asked, a BSEC official said the aspirant firms will apply to the exchanges for TREC but it will be cancelled if the firm fails to receive certificate from the regulator under the broker-dealer rules.

A senior official of the premier bourse said the DSE has sought one month time to prepare its opinion on the draft rules formulated to issue new TREC.

Asked, an official of the Chittagong Stock Exchange (CSE) said they have sent their opinion to the securities regulator.

He said as per the demutualisation act, there is no bar to issue fresh TREC.

"The fresh TREC holders will not be the exchange's shareholders. So, our opinion stressed on the safety, among others, of customers' money to be invested through the new TREC holders,"