The Chittagong Stock Exchange (CSE) is targeting a December launch for Bangladesh’s first commodity derivatives market, but says trading will begin only after it secures at least 30 brokers to ensure sufficient liquidity.
The Bangladesh Securities and Exchange Commission (BSEC) on Monday gave preliminary approval to six brokerage firms to register as commodity derivatives brokers, while CSE ultimately wants 30 to 50 participants.
CSE Managing Director M Shaifur Rahman Mazumdar told TIMES the December target is not yet final and will depend on completing broker registrations and regulatory approvals over the next two months.
The six firms are Sohel Securities, Island Securities, NLI Securities, Be Rich, PHP Stocks & Securities and UCB Stock Brokerage. Letters of intent will be issued to them as the next step.
“Ten or 12 brokers can never make this market liquid. If the market is not liquid, it will be inefficient from the outset. Our target is 30 to 50,” Mazumdar said.
Around 450 brokerage firms currently operate in Bangladesh’s equity market. CSE considers 30 brokers the minimum needed for launch, while a larger pool would improve participation and liquidity.
Broker registration remains under way. Some applicants are awaiting checks including Credit Information Bureau (CIB) clearance, while others are preparing applications.
CSE has also advertised for new participants.
Mazumdar said at least seven prospective entrepreneurs had contacted the exchange, including some that do not currently operate as equity brokers but are interested in setting up businesses specifically for commodity derivatives.
Applications will move through CSE to BSEC and could take roughly two months to complete, depending on the commission’s approval process.
The exchange has already trained and licensed 250 authorised representatives through a two-day course and examination.
Commodity derivatives brokers will require separate registration. Mazumdar said a firm with trading rights at one exchange must have at least Tk10 crore in paid-up capital, while one with trading rights at two exchanges will need Tk20 crore.
Before launch, CSE plans two more roadshows. One, expected in mid-November, will target institutional investors. The exchange has invited the finance minister and is awaiting confirmation.
A second event will target retail investors and participants in commodity value chains through fairs, seminars and awareness programmes.
CSE plans to move towards launch after those programmes.
Trading will initially cover futures contracts in gold, silver and crude oil.
Options are not planned in the first phase.
Each futures contract will have a specified maturity and will be settled against a reference price. Investors expecting prices to rise could buy contracts, while those expecting declines could sell them, with gains or losses moving with the underlying commodity price.
The market will initially use cash settlement through banks rather than physical delivery. CSE plans to introduce physical delivery later as market capacity develops.
Producers, importers, traders, suppliers and retail investors will be able to participate.
Mazumdar said businesses could use futures to hedge price risk, while general investors would also have access to the market.
