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Stock brokers no longer want floor price

by fstcap

Stock brokers, who had once been in favour of artificially keeping the market from a decline, want to get rid of it.

At a meeting with executives of the Bangladesh Securities and Exchange Commission (BSEC) on Wednesday, they said the price restriction was an impediment to the normal functioning of the capital market.

Representatives of 30 top brokers attended the meeting chaired by BSEC Commissioner Dr. Shaikh Shamsuddin Ahmed.

Taking to the FE, several participants said the stock brokers had drawn the regulator’s attention to the issues, such as liquidity shortage, which emerged in the absence of price discovery of the listed securities.

The BSEC imposed the floor price in July 2022 to arrest free fall of the market amid macroeconomic worries intensified by the post-Covid impacts and the Ukraine-Russia war.

The regulator reiterated that it did not want the floor price in place, but the mechanism had been introduced to save small investors, with support from market stakeholders.

As the price restriction continues to influence the market, share transactions have dwindled as buyers turned away from it. Investors have refrained from putting in fresh investments, pushing down daily turnover.

“All the representatives [of the brokers] said the floor price should not be continued for the sake of restoring normal functioning of the market,” said Khandoker Saffat Reza, CEO of LankaBangla Securities.

Requesting anonymity, another meeting participant said BSEC Commissioner Mr. Ahmed had accepted the arguments placed by the brokers.

He, however, insisted that the floor should be withdrawn in a way ensuring that the regulator would not need to deploy such a measure in future.

Mr. Ahmed said many reforms in the financial sector would be visible after the national election, and that the capital market would also be subjected to policy changes.

The regulator earlier said the floor would be lifted after the national election scheduled for January 7.

At the meeting, however, BSEC officials did not mention any timeframe for the removal of floor prices.

Apart from the floor price, the participants also discussed impacts of the interest rate hikes and a lack of quality scrips.

The representatives of the BSEC and stock brokers laid importance on bringing quality IPOs (initial public offerings) to achieve a depth of the market.

Some of them said the rise in the interest rates resulting from policy rate hikes was also a concern for the capital market. The central bank increased the rate as part of its inflation-combating measures.

The managing director of UCB Stock Brokerage, Mohammed Rahmat Pasha said the interest rate would get to a stable position through market-driven policies after the national election. And the liquidity flow will improve in the capital market at this.

The top 30 stock brokers, whose representatives attended the meeting, included LankaBangla Securities, BRAC EPL Stock Brokerage, UCB Stock Brokerage, EBL Securities, Shanta Securities, City Brokerage, and ICB Securities Trading Company.

source: thefinancialexpress.com.bd


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