An Analysis of the Demutualization process of Dhaka Stock Exchange Ltd

Abstract

Stock exchange is one of the most important financial institutions of any economy as well as Bangladesh. A stock exchange is a form of exchange which provides for stock brokers and traders to buy or sell stocks, bonds and other securities. Stock exchange did not begin as the super sophisticated, simultaneous, worldwide trading exchanges like today. It was not until 1531 when the first institution roughly approximating a stock market emerged in Antwerp (Belgium). Now-A-Days stock exchange is one of the most important and biggest financial institutions of any economy. Bangladesh has two stock exchanges, Dhaka Stock Exchange, established in 1954 and Chittagong stock exchange, established in 1995. Recently Government and BSEC decided to demutualization of Dhaka Stock Exchanges. DSE is the first and biggest stock exchange of the country. Demutualization is the modern, popular and current trend among stock exchanges all over the world. Bangladesh has started its journey to get their exchanges demutualized in 2011. Previous record of Demutualization of other stock exchange (Like: London Stock Exchange), the performance of demutualized exchanges have improved in terms of operational profitability and efficiencies along with governance scale. There are many reasons of the demutualization of Dhaka Stock Exchange (DSE). The main reason of the demutualization of Dhaka Stock Exchanges (DSE) is Stock market crash in 1996 and finally in 2010-11. December-2010 and January-2011 was the historical month of the economy of Bangladesh stock market. Then Government and BSEC take necessary steps to demutualize their stock exchanges. Demutualization is shifting a non-profit organization into a profit oriented organization, controlling functions are detach from controller’s functions, empowering controller and taking decisions are not motivated by the market. Different stake holders of capital market and civil society also support and demand for demutualization of exchanges. Nowadays Demutualization is a widespread global phenomenon. It has been looked to as a means of meeting developmental and competitive challenges and even to address failure to carry out credible operations. The extent of movement toward a demutualized structure is also related to the competitive threat.