Bangladesh’s stock market has too few quality shares, limited liquidity and a narrow range of products to serve investors while meeting companies’ need for long-term capital.
Dhaka Stock Exchange (DSE) is focusing on deregulation, faster listings, a vibrant bond market, intraday trading, shorter settlement cycles, derivatives and integrated surveillance to address those challenges, its Managing Director Nuzhat Anwar told TIMES of Bangladesh’s Mahfuz Ullah Babu in an interview.
The premier bourse has developed a five-year strategy to rebuild investor and issuer confidence and help Bangladesh move from frontier to emerging-market status. The market’s size relative to the economy is expected to double.
According to Nuzhat, intraday trading and next-day settlement will be introduced this year, while index futures are targeted for early 2028.
She said the market inherited weak transparency, limited accountability and the absence of a long-term strategy. However, regulators, the government and stakeholders are now taking a more coordinated approach.
“Everyone has now reached one point that we actually have to make the capital market stand if we want private-sector growth and job creation,” she said.
DSE’s product expansion will begin with bonds. The exchange is working with Bangladesh Securities and Exchange Commission (BSEC) to make issuance cheaper and faster, as bonds currently require more time and cost than bank loans.
DSE has reduced bond issuance costs by nearly 80 per cent, Nuzhat said, while BSEC has indicated that compliant applications could be approved quickly.
“We cannot move very far without bonds,” she said.
Alongside developing the primary bond market, DSE is working to create a stronger secondary market where investors can trade bonds easily.
Intraday trading will allow investors to enter and exit positions on the same day, while next-day settlement will enable investors to sell securities in the following session.
Index futures will allow investors to take positions on future index movements and hedge against adverse market moves without buying or selling shares.
Drawing on her international finance experience, Nuzhat warned against turning sophisticated products into tools for uninformed retail speculation.
DSE also wants to increase the supply of quality equities through faster IPOs and direct listings.
Proposed direct-listing changes could bring multinational companies and stronger local corporates to the exchange. Several multinationals are already discussing the proposed framework.
Companies that do not need new capital but want existing owners to partially exit could also be attracted to the stock market.
BSEC is also considering combining direct listings with IPOs, allowing existing shareholders to sell part of their holdings while companies raise fresh capital.
“It is a market-friendly initiative, as foreign investors worry about the exit route here,” Nuzhat said.
Companies are also seeking flexibility over the rule limiting the share of IPO proceeds that can be used for loan repayment.
Meanwhile, the IPO approval process is being shortened from around 18 months to a target of 55 days.
“The changes are very welcome,” she said.
However, faster listings alone will not improve the market unless investors trust company disclosures.
Regulators are working to make credit ratings and audit reports more reliable for investors.
Trust also depends on surveillance systems that can distinguish genuine market activity from manipulation.
DSE’s surveillance system identifies unusual trading activity, after which investigators determine whether wrongdoing has occurred.
“Manipulation cannot be understood without an investigation,” Nuzhat said.
She said fragmented infrastructure remains a key challenge. DSE lacks API connectivity with the Central Depository Bangladesh Ltd database, limiting real-time visibility into securities transactions.
DSE wants the exchange, central counterparty, depository and brokers’ back offices integrated so that every transaction is reflected across the system.
“That would allow circular trade monitoring and make surveillance much more efficient,” she said.
The work has already started.
Nuzhat sees expanding quality equities and bonds as the way to build a deeper capital market.
A shortage of good shares can push investors towards weaker companies simply because better alternatives are unavailable.
“If we can bring some good equity and good liquidity to the market, the scenario will definitely change,” she said.
She said Grameenphone’s listing showed how a major company could strengthen the market.
“If we can bring several such stocks, for the right reasons, volume will automatically go up.”
The bond market would provide another source of liquidity and long-term financing at a time when the money market cannot meet all corporate funding needs.
“If the money market does not have the capability at this moment, then who will provide the capital? The capital market has to,” she said.
The five-year plan aims to build a market “strong enough to generate its own growth”.
DSE wants the capital market’s contribution relative to GDP to roughly double from about 8 per cent to 16 per cent within five years, its managing director said.
The longer-term goal is emerging-market status, but DSE does not want to move before the market can sustain the transition. A key requirement is maintaining enough companies above market-capitalisation thresholds.
DSE is working with MSCI and Vietnam, which recently completed the transition, to understand how to meet the requirements sustainably.
Nuzhat has also highlighted market structures that make Bangladesh harder for foreign investors to understand, including A, B and Z share categories based partly on dividend payments and an industry classification system that is not fully aligned with global standards.
Short selling, which allows investors to benefit from market declines, is not yet a priority.
“It is a very sensitive area,” Nuzhat said, adding, “The sophistication has to come first.”
