Assignment on Assignment on Capital Market Financing

Rakib Mia ID: 170202087 Section: B Year: 4th year 2nd semester Executive summary Investing in long-term debt is the primary function of the capital markets. The word "capital market" refers to a network of highly interconnected marketplaces in which capital is lent or borrowed for short, medium, and long-term periods, as well as for undetermined periods in the case of equity.

Assignment on “Capital Market Financing”
Submitted To:
Mr. Md. Mahfujur Rahman
Assistant Professor
School of Business
(BBA Program)
Submitted By:
Md. Rakib Mia
ID: 170202087
Section: B
Year: 4th year 2nd semester

Executive summary
Investing in long-term debt is the primary function of the capital markets. A capital market is a
place where buyers and sellers trade financial instruments such as bonds and other such
instruments. People and businesses trade financial securities in this market. Public and private
sector organizations/institutions also frequently sell securities on the capital markets to raise
money. There are primary and secondary marketplaces in this type of market. In the capital
market, corporations and the government can raise long-term funds through the sale of securities.
It's a market where people can borrow money for longer periods of time than a year. The stock
and bond markets are part of the capital market. The word "capital market" refers to a network of
interconnected marketplaces in which capital in financial form is lent or borrowed for short,
medium, and long-term periods, as well as for undetermined periods in the case of equity.

Table of Contents
Executive summary.....................................................................................................................................1
Introduction.................................................................................................................................................3
Capital market of Bangladesh:.....................................................................................................................3
Types of Capital Market:.............................................................................................................................4
Operation of Primary & Secondary Market:................................................................................................4
IPO..............................................................................................................................................................6
Preparing an IPO.....................................................................................................................................6
ROLE OF CAPITAL MARKET.................................................................................................................8
Market System.............................................................................................................................................8
The Instruments of Capital Market............................................................................................................10
1. Share..................................................................................................................................................11
2. Debenture..........................................................................................................................................11
3. Bond..................................................................................................................................................11
Stock Market in Bangladesh......................................................................................................................14
Dhaka Stock Exchange (DSE)...................................................................................................................14
Nature of Dhaka Stock Exchange......................................................................................................14
Chittagong Stock Exchange (CSE)............................................................................................................15
SWOT Analysis of Stock Market..............................................................................................................17
Circuit Breaker..........................................................................................................................................18
Category of the companies........................................................................................................................19
Settlement cycle........................................................................................................................................19
T+2 settlements cycle............................................................................................................................20
T+3 settlements cycle............................................................................................................................20
Margin Loan..............................................................................................................................................20
Problems of Structure of Capital Market in Bangladesh............................................................................20
Math Portion..............................................................................................................................................21
Conclusion:................................................................................................................................................24
References:................................................................................................................................................25

Introduction
It is possible to describe the capital market as the engine that drives capital raising and, in turn,
the speed of industrialization and privatization. To put it another way, the capital market refers to
the country's stock exchanges. A market for long-term investment funds exists here.
Bangladesh's capital market is the third-largest in South Asia, while being one of the continents
smallest. In addition to the Dhaka Stock Market (DSE) and Chittagong Stock Exchange (CSE),
which both operate fully computerized stock exchanges, the country also has an over-the-counter
exchange run by CSE. The Securities and Exchange Commission (SEC) is also a part of the
regulatory structure because it implements and oversees rules and regulations to operate and
develop the capital market. For the settlement of CSE and DSE transactions in dematerialized
securities, Bangladesh's Central Depository Bangladesh Limited (CDBL) serves as Bangladesh's
only Central Depository. Many people are involved in the financial markets. All the major
financial institutions, including commercial banks, savings and loan associations, credit unions
and mutual savings banks as well as merchant bankers, discount houses and venture capital
companies, are included in this group. They also include investment clubs, pension funds and
stock exchanges, as well as underwriters, portfolio-managers and insurance companies.
Capital market of Bangladesh:
As part of the global financial system, Bangladesh's capital market is considered a "emerging"
market. Objectives: To create in Bangladesh a capital that is well-balanced, secure, and resilient
As the third biggest in South Asia, Bangladesh has a relatively tiny capital market. Dhaka Stock
Exchange (DSE) and Chittagong Stock Exchange are the two fully automated stock exchanges in
Bangladesh (CSE). BSEC was founded in 1993 to supervise the activity of the exchanges, ensure
proper issuance of securities and compliance with regulations, and protect the interests of
securities investors after many years of operations.

Types of Capital Market:
 The Primary Market
The primary market deals with newly issued securities and is responsible for generating
new long-term capital.
 The secondary market
The secondary market handles the trading of previously-issued securities and must
remain highly liquid in nature because most of the securities are sold by investors.
Operation of Primary & Secondary Market:
Investors Share purchase:
Investor shares: Mutual fund shares purchased by individual investors as opposed to
institutional shareholders.
Stock Market: Participants in the stock market range from small individual stock investors to
large hedge. Provide a bid and ask price at which they will always purchase or sell their stock.
A share of stock is the smallest unit of ownership in a company. Investors buy preferred stock
for its current income from dividends, so look for companies that make big profits to use.
Investment Bangladesh stock market (CSE and DSE): Investment in primary and secondary
market share is eligible for investment allowance. The steps necessary in order to buy/sell share
in Bangladesh stock.
Primary Market: Underwriting groups are responsible for facilitating primary markets, which
are essentially two separate markets inside the stock market.
What you learn about primary and secondary markets will help you better grasp how equities
move.. There would be a lot more difficulty in capitalizing on the stock market without them.
Companies, governments, and other public sector organizations can raise money by selling new
stock or bonds on the primary market..
Markets for primary and second-hand securities exist. Securities such as stocks and bonds are
first placed with investors directly.

When shares are generated and sold by the issuing company in order to benefit financially by
raising capital, this is referred to as the "primary market."
The primary market is the section of the capital markets that deals with the selling of a new stock
issue, which is known as an IPO in the industry.
Government and public sector organizations can raise money by issuing new instruments, such
as stocks or bonds. In most cases, a group of stockbrokers will take care of this for you.
Features of Primary Markets: New long-term equity capital can be found here. The initial sale
of securities occurs on the primary market. In this way, the fresh issue market is also referred to
as (NIM). When the corporation issues the securities directly to investors, it is known as a
primary issue. After receiving the funds, the corporation will issue the investors with fresh
certificates of ownership. Companies use primary concerns to start new businesses or to
modernize their present businesses.
The primary market is essential to the economy's ability to generate capital. Initial Public
Offering (IPO): Rights issue (for existing companies) and preferred issue (for new enterprises).
The principal market in the stock market is the initial public offering (IPO).
In the secondary market, everyone who buys or sells shares that have already been issued is
involved. First-time investor purchases of an initial public offering (IPO) are considered primary
market trades.
Secondary Market: The financial market where previously issued securities and financial
instruments, such as stock, bonds, options, and features, are bought and traded is also known as
the "aftermarket.".
Any used products or assets, or an alternate application for an existing product or asset, where
the second market is the customer base is also known as the secondary market. When it comes to
food production and livestock feed, maize has traditionally been the primary source of the latter.
Second or third markets have emerged, however, for use in the manufacturing of ethanol Loans
sold to investors like Fannie Mae and Freddie Mac by a mortgage bank are referred to as
"secondary market" loans.

Secondary Market: A market in which investors buy and sell securities and other assets from
each other, rather than directly from the issuers.
This is the secondary market for securities that have already been offered on the primary market.
Secondary markets account for the majority of transactions.
In the secondary market, existing securities, such as stocks and bonds, are traded with investors
either directly or through intermediaries.
A market in which investors buy securities from other investors rather than the issuer, rather than
directly from the company Secondary markets are financial markets where investors directly buy
and sell financial items between themselves.
Similarly, secondary markets can be found in some real estate contexts, such as the purchase and
sale of ownership shares in time-share holiday homes.
Founders, employees, angels, and institutional investors can all access secondary markets and
private shares, such as those offered by the second market and share post.
In the case of a new stock issue, underwriting is the process of selling fresh issues to investors.
This is the company's first-ever public sale (IPO).
In the prospectus, the price of the investment includes a dealer's commission, which can be seen.
IPO
The first time a private corporation sells stock to the general public. It is not uncommon for
smaller, younger companies to go public in order to raise money for growth, but An IPO's
primary goal is to raise money for the company. Initial public offerings (IPOs) are offerings of
shares for sale to the general public for the first time. Initial public offerings (IPOs) and initial
public offerings (IPOs) are two of the most important aspects of a company's initial public
offering. In addition to selecting an exchange and a trade symbol, the IPO procedure necessitates
the permission of the SEC and shareholders.
Preparing an IPO
When a company decides to go public, it will sell stock to the general public in order to raise
money. One of the primary purposes of conducting an IPO is to raise capital for a company that

has been privately held. It is frequently the primary means by which a new business can raise the
capital it requires to be successful in the marketplace.
To preparing an IPO there are 5 steps available & they are given below:
1. Determine if company is eligible to go public: Businesses that are eligible for an initial
public offering (IPO) often have a track record of profitability and a sizable quantity of cash on
hand. If you're not sure if your firm is the type that the general public would be interested in
investing in, talk to an investment banker or outside consultant about setting up a meeting.
2. Contract with an investment banker: Investment bankers can assist you decide how much
money to raise, how much stock to sell, and how much of the firm to put up for sale in the first
public offering. At this point, the investment banker is acting as an underwriter, agreeing to buy
all shares the firm wishes to offer.
3. Draft a prospect and file it with the Securities and Exchange Commission (SEC):
It is referred to by the SEC as "S-1." Its primary function is to provide information about the
company. Even if the number of shares and the price per share in the IPO C have not been
decided, an estimate of what they will be is contained in the initial prospectus, the first document
filed by the companies. Early in the IPO process, the initial prospectus is submitted. A few days
before the initial public offering, the company filed its final prospectus. In this offering, the
number of shares and their value are both predetermined.
4. Present the opportunity to potential shareholders: People and groups will be encouraged to
purchase IPO shares through presentations and offers made by the Banker and the corporation's
top officials before the actual IPO. The investment banker evaluates possible investors based on
the sort of firm that desires to go public and the interest that the potential investor may have in
the corporation. Non-binding pledges to buy stock are created through this procedure and are
referred to as "subscriptions." As described in the first stage, it is Longley used as a tool to
determine whether or not the public is interested in investing in the company, as well as the price
of a share.
5. Sell the shares to the investment banker: The investment banker will buy the shares on the
day of the IPO and sell them to investors at the same time. To calculate the banker's price, the

IPO price is deducted together with its 7 percent charge. The stock can now be traded on the
open market.
ROLE OF CAPITAL MARKET
As a means of raising long-term funding for governments, banks, and companies while
facilitating the trade of securities, the capital market is essential. Within the capital market, the
performance of the stock and bond markets governs this fund raising.
One of Asia's smallest capital markets, but the third-largest in South Asia. Dhaka Stock
Exchange (DSE) and Chittagong Stock Exchange are the two fully automated stock exchanges in
Bangladesh (CSE). In addition, the Securities and Exchange Commission (SEC) serves as a
designated regulator, implementing rules and regulations, and monitoring their effects in order to
operate and grow the capita market.
Market System
Buying a Mutual Fund Directly from a Mutual Fund Company
With some mutual funds, it's possible to open an account directly with the company and have
your money invested there. To start a standard account or a special account like a retirement
Roth IRA or Traditional IRA, we need to fill out paperwork online and mail it in with a cheque.
The mutual fund can even be set up to automatically remove money from our checking or
savings account each month to invest for us! In order to smooth out the average price of our
mutual fund shares, a method known as dollar cost averaging is highly recommended. This
method also helps to reduce the risk of investing all of your money in the market at a peak, such
as on the day before the dotcom crash or the Wall Street meltdown that started the Great
Recession in 2008.
When you buy mutual fund shares directly from the mutual fund provider, you avoid paying a
commission, which means that more of your money is put to work for you.
As an illustration: Ticker symbol is brief code provided by the stock exchange to identify an
investment. The ticker symbol for Coca-Cola stock, for example, is KO. Tweedy Browne Global
Value Fund is a mutual fund, thus you should know the basics of investing in mutual funds.

5 Ways to Place Your Stock Order
There are five different types of stock orders that your broker will likely let you use. They are:
1. Market Order
2. Limit Order
3. Stop Order
4. Stop-Limit Order
5. Trailing Stop Order
Market Order:
The term "market order" refers to a request to buy or sell a stock at the market price at the time
of the order. Orders placed on the market are essentially the same as those placed on the stock
exchange. It's important to keep in mind that with a market order, the market sets the price for
your stock purchase or sale. With a limit order, this issue can be addressed.
Limit Order:
This is an order that can be open for a specified amount of time and execute at a price that you
specify (or better yet, the market price). While a limit order will protect you from purchasing or
selling your stock at a price you don't desire, if the price is too far off, the order will never be
executed. The fact that certain brokers charge more for limit orders should be taken into
consideration. Why? In the absence of an execution, there can be no compensation.
Stop Order:
To put it another way, whenever your stock price hits the stop level, the market order is
activated. This type of order is also known as a stop-loss order, as it helps investors limit their
losses.
Stop-Limit Order:
Limit orders are similar to stop orders in that they are activated when your stock hits a
predetermined price.

Trailing Stop:
A stop order based on a percentage change in the market price, this is essentially. You have
control over how long an order will remain open with your broker when you place it. If an order
is set to be a day order, it will remain in effect until the end of the trading day. Orders marked
"good-til-cancelled" are valid until you cancel them.
CDBL
Since its establishment as a public limited company on August 20, 2000, Central Depository
Bangladesh Limited (CDBL) has provided a variety of services to investors, including the
operation and maintenance of the Central Depository System (CDS) of Electronic Book Entry, as
well as the recording and maintenance of securities accounts and the registration of securities
transfers.
About BICM
To provide "practical capital market education and training" to Bangladeshi citizens, the
Bangladesh Institute of Capital Market (BICM) serves as the country's national institution. As a
not-for-profit organization with a limited liability company and no share capital, it was formed
through a Public-Private Partnership.
First Initiative, a collaborative effort of the World Bank, International Monetary Fund, and the
Dutch government, assisted Chittagong Sock Exchange Ltd. in conducting a feasibility
assessment for the establishment of a securities institute in Bangladesh.
The government of Bangladesh has allocated a large sum of money to cover the costs of leasing
and purchasing BICM's facilities and logistics.
The Instruments of Capital Market
The phrase "capital market" refers to the section of the financial market that deals with the
efficient transfer of medium- to long-term money from surplus to deficit. Instruments, which are
records that exhibit evidence of investments, are used to move monies. The capital market's
trading medium (instruments).

Three types of capital market instruments are available to investors.
1. Share
2. Debenture
3. Bond
1. Share: There are many different types of financial instruments represented by the share,
including stocks, REITs, mutual funds, and limited partnerships. A shareholder, usually referred
to as a stockholder, is a person who holds stock in a business or organization and receives
dividends from that ownership. A stockbroker frequently serves as a go-between when it comes
to buying and selling shares.
Types of Share:
a) Preference Share: As a hybrid instrument, a Preference Share is a stock that can have any
combination of attributes that common stock does not, such as the properties of both an equity
and debt instrument.
b) Equity Share: Individuals and businesses acquire and hold stock on a stock market in order
to profit from dividends and capital gains when the stock's value improves, referred to as an
equity investment.
Valuation: Different markets use different principles to evaluate a stock. Whether or not a share
can be sold at any particular time depends on the market's liquidity. It is generally accepted that
an actual sale transaction between a buyer and a seller is the best predictor of the 'True value of
shares' at any given time.
Dividend: To put it simply, dividends are a portion of the company's overall profits that are
distributed to its shareholders. These are well-documented examples of capital gains reinvested.
2. Debenture: To generate or recognize a debt, the debenture is either a written document or an
electronic signature. A debenture can be classified into two sorts. • Convertible Debenture • Non-
Convertible

Convertible: Bonds that can be converted into equity shares of the issuing business after a
defined length of time are called convertible bonds.
Non-Convertible: In other words, they cannot be exchanged for equity shares in the liable
business's parent company. There is no convertibility tied to them, hence they are debentures. As
a result, their interest rates tend to be greater than those of their convertible equivalents.
3. Bond: Bond is an interest financial asset which is fixed and issued by governments, public,
utilities, companies, banks, and other large entities bonds are used to pay the bearers fixed
amounts at specified dates.in business bond is written as wel as signed promise to pay certain
sum of money before or on a certain date. Bond markets play an important role in mobilization
of capital
The investments are very necessary for economic development of a country. A good market will
help promote economic growth and reduce the risk of financial crises. It is a debt security in
which authorized issuer owes the holders a debt depending on the terms of the bond. A bond is a
formal contact to repay borrowed money with interest at fixed intervals
Types of bonds:
Corporate Bond
A corporate bond is a bond issue by a corporation. It is a bond that a corporation issues to raise
money effectively in order to expand its business. The term is usually applied to longer-term debt
instruments, generally with a maturity date falling at least a year after their issue date. (The term
"commercial paper" is sometimes used for instruments with a shorter maturity.)
Government Bond A government bond is a bond issued by a national government, generally
promising to pay a certain amount (the face value) on a certain date, as well as periodic interest
payments. Government bonds are usually denominated in the country's own currency. Bonds
issued by national governments in foreign currencies are normally referred to as sovereign
bonds, although the term "sovereign bond" may also refer to bonds issued in a country's own
currency.
Secured bonds

Secured bonds have specific assets of the issuer pledged as collateral for the bonds. A bond can
be secured by real estate or other assets.
Unsecured bonds
Unsecured bonds are issued against the general credit of the borrower, they are also called
debenture bonds.
Term bonds
Bonds that mature at a single specified future date are called term bonds.
Serial bonds
Bonds that mature in installments are called serial bonds.
Registered bonds are issued in the name of the owner and have interest payments made by
cheque to bondholders of record. Bearer or coupon bonds are not registered; thus bondholders
must send in coupons to receive interest payments.
Convertible bonds permit bondholders to convert the bonds into common shares at their option.
Redeemable (callable) bonds are subject to call and retirement at a stated dollar amount prior to
maturity at the option of the issuer.
Retractable bonds are subject to redemption prior to maturity at the option of the holder.
Zero-Coupon Bonds
• Do not pay interest
Sold at deep discount from par value
Value increases over time
Subject to tremendous price volatility as interest rates fluctuate

Interest must be reported as it is accrued for tax purposes, even though no interest is actually
received.
Treasury strips are zero-coupon bonds created from U.S. Treasury securities.
Junk Bonds
Highly speculative, usually subordinated debentures
Have low, sub-investment grade ratings
Typically offer very high yields
Prices tend to behave more like stocks than bonds
Stock Market in Bangladesh
Dhaka Stock Exchange (DSE)
Chittagong Stock Exchange (CSE)
Dhaka Stock Exchange (DSE): Dhaka Stock Exchange (Generally known as DSE) is the
main stock exchange of Bangladesh. It is located in Motijheel at the heart of the Dhaka city. It
was incorporated in 1954. Dhaka stock exchange is the first stock exchange of the country. As of
31 December 2007, the Dhaka Stock Exchange had 350 listed companies with a combined
market capitalization of $26.1 billion.
Nature of Dhaka Stock Exchange
There are four markets in the system
1. Public Market
Only trading of market bot share is done here through automatic matching.
2. Spot Market
Spot transactions are done here through automatic matching which must be settled within 24
hours.
3. Block Market

A place where bulk quantities of shares are traded on pick and fill basis.
4. Odd Lot Market
Odd lot scripts are traded here based on pick and fill basis.
Chittagong Stock Exchange (CSE): The Chittagong Stock Exchange (CSE) began its
journey in 10th October of 1995 from Chittagong City through the cry-out trading system with
the promise to create a state-of-the art bourse in the country. Founder members of the proposed
Chittagong Stock Exchange approached the Bangladesh Government in January 1995 and
obtained the permission of the Securities and Exchange Commission on February 12, 1995 for
establishing the country's second stock exchange. The Exchange comprised of twelve Board
members, presided by Mr. Amir Khosru Mahmud Chowdhury (MP) and run by an independent
secretariat from the very first day of its inception's was formally opened by then Honorable
Prime Minister of Bangladesh on November 4, 1995.
Regulations of DSE & CSE:
No. DSE/459/99.- In exercise of the powers conferred by section 34 of the Securities and
Exchange Ordinance, 1969 (XVII of 1969), the Dhaka Stock Exchange Limited, with the
approval of the Securities and Exchange Commission, makes the following regulations, namely:
1. Short title, commencement and application. –
(1) These regulations may be called the Dhaka Stock Exchange Automated Trading Regulations,
1999.
2. Words and expressions used herein and not defined but defined in the Securities and
Exchange Ordinance, 1969 (XVII of 1969), or the Securities and Exchange Commission
Act, 1993 (XV of 1993), shall have the same meanings as are respectively assigned to them in
the said Ordinance or Act
3. Trading day.. The trading shall be open on all days except bank holidays as declared under
the Negotiable Instruments Act, 1881 (XXVI of 1881):

4. Trading period.- Unless otherwise decided by the Council, the trading period shall be
between 10-30 AM to 2-30 PM on all trading days:
5. Qualification for trading..
(1) A member shall qualify himself for trading if he –
(a) Obtains a registration certificate from the Commission issued under regulation 5(4) of the
Securities and Exchange Commission (Stock-Dealer, Stock-Broker and Authorised
Representative) Regulations, 1994;
(b) becomes a member of the DSE Clearing House;
(c) Is not otherwise barred by DSE or SEC under any law, rule or regulations for the time being
in force for trading.
(2) The DSE shall notify the name and other necessary particulars of a member whenever he
incurs a disqualification for trading or becomes otherwise ineligible for trading.
6. Functions of trading sessions. - The functions of trading sessions shall be as under, namely:
(a) Pre-opening session. This is the session during which members are allowed only to enter
orders and indicate their willingness for buying and selling of various securities. Orders made
during this session are held in the system and not forwarded to the execution engine. The
previous day's closing price and index of di.... securities shall be made available in this session to
the members for trading.
(b) Opening session. The opening price of securities is caulked in this session. The calculation
is made on the basis of orders entered in the system during the Pre-opening session. The opening
price of securities is established in this session. Where there is no trading of securities, the last
closing price of that security shall be its opening price. No entry order shall be allowed or
permitted in this session.
(c) Continuous or Regular trading session. - Entry of orders, deletion and modification of
orders can be made in this session. Orders are executed in this session and where any order or
part of any order is not or cannot be executed; such order or part thereof will be stored separately
to be carried forward in the next following such session.

(d) Closing session. - During this session the system stops receiving orders. The closing price
for a security shall be determined as per the weighted average price of all the trades in the last 30
(thirty) minutes before the closing session. If there is no trade during the above specified time,
the weighted average price of maximum 20 (twenty) number of trades preceding the above 30
(thirty) minutes shall be taken for determination of closing price. If there has been no trade in the
security during the continuous trading session the opening price of the security shall be treated as
the closing price. Pending orders executable at closing price and orders ‘match at closing price
shall be executed in this session. Al other pending orders shall be carried forward to the Post-
closing Session
(e) Post-closing session.- This session allows traders to execute their remaining orders and the
fresh orders entered during this session. However, the trading engine accepts orders at closing
price only during this session. All trades are executed at the cbsing price. No quotes are accepted
during this session.
7. Trade confirmation. - For every successful match, a trade with a unique contract number is
created and the counter parties to the trade are notified by means of a trade confirmation. The
security, the trade quantity, the howla type and price at which the trade occurred shall broadcast
to all trading workstations which can be seen on the market ticker. The trade confirmation shall
be seen on the trade ticker on the trading workstations of both the counterparties to the trade. The
traders can view the trade details in the trade view and also have it printed.
8. Disclosed and Undisclosed volume.- (1) An order may specify the total and lesser volume of
securities for disclosure to the market. The disclosed volume shall not exceed the total volume.
(2) Total and disclosed volume of an order must be of a market lost.
(3) An increase in disclosed volume shall change in the queue priority but a decrease in disclosed
volume shall not change in queue priority.
SWOT Analysis of Stock Market
Strength, weakness, opportunity, and threats (SWOT) of Bangladesh Stock Market is given
below:
Strength:

→ The first and for most thing of strength of Bangladesh stock market is its ability to Provide
high return.
Regulatory body of Bangladesh stock market that protects the interest of the investors.
Large number of securities which provides medium for investment.
Large number of Brokers who plays a role of facilitator for investment.
Weakness:
The weak point of Bangladesh stock market is its volatility (i.e., high risk).
It is a kind of gambling where no guarantee of return and some time it depends on luck also.
Opportunity:
Stock market provides an opportunity to money lender and money seeker to invest and use
money for their plan.
It provides an opportunity to the investor to be the owner of the company and contribute in the
business decision of the company.
Stock market is a kind of indicator of the economic growth of the country where it provides an
opportunity to gain according to the inflation of the country or more than that.
Threats:
There are many competitors of stock market such as post office savings, public provident fund,
company fixed deposits, fixed deposits with bank etc. which provides fixed and assured returns.
Changing of economic condition.
The capital market instrument is highly risky then money market.
Changing of government rules and regulations. Speed of growth in Capital Market not
complemented by the controlling agency.
Circuit Breaker
Both DSE and CSE have contributed to the development of this automated system. There is a
limit to how much a stock can rise or fall under this method. Power Grid's closing price was

710tk, and the circuit breaker is 10% of that price. This suggests that Power Grid's value will not
climb or fall by more than 10% today. As a result, the greatest price is 710+710*10 percent
=781tk, while the lowest price is 639tk in a single day. The stock market's exceptional volatility
necessitates the introduction of this approach.
Category of the companies
Currently, corporations are categorically divided and investors opt to invest their money in the
stock market based on factors such as profit and loss, the holding of annual general meetings
(AGMs), operational activities, the declaration of dividends, and so on. A, B, N, and Z are the
four categories of companies that are listed below in more dept.;
Name of the
Category
Criteria for selecting the category
A category  AGMs are held on a regular basis.
 The announcement of a dividend of 10% or higher.
B category  AGMs are conducted on a regular basis.
 A dividend payment of less than 10%
N category  Firms that have only recently been registered with the Securities
and Exchange Commission (SEC) and have not yet been able to
have an annual general meeting (AGM). This is, of course, a
proposal that should be taken into consideration.
Z category  Failure to hold the annual general meeting on time
 Absence of any dividend payment
 Losses that are greater than the amount of capital that is available
to be invested
 More than six months of business inactivity.
Settlement cycle
The settlement cycle is the period of time during which the stock exchanges are required to settle
security transactions on their respective exchanges. It takes time for a security to be cleared for

transfer from a seller to a buyer since it must go through a settlement process. This results in an
elapse of time between the time a trade is made ('T') and the time it settles. Buying and selling
brokers pay all fees and AIT to DSE throughout the settlement procedure. As part of the CDBL
settlement timetable, DSE gets the receivable amount from purchasing brokers and allocates it to
the selling broker clearing account. There is mentioned two settlement below;
T+2 settlements cycle
If you purchase shares in any of the following categories: A, B, or N, your shares will mature in
the T+2 settlements cycle. After two business days, you'll be able to sell the shares you
purchased. This means that if you acquire shares of Category A, B, or N on Sunday, the
transaction will be completed on Tuesday. ‘All bank and exchange holidays and weekends are
not included here.
T+3 settlements cycle
Your shares will mature in T+3 settlements cycle (which refers to today plus three working days)
if you purchase any of the shares in Category Z. This means that you will be able to sell the
shares you purchased after three working days.
Margin Loan
With a margin or investment loan, you can borrow money to invest in approved stocks or
managed funds while pledging your existing cash, shares, or managed funds as collateral. Loan
to value ratio and a credit limit based on your financial situation decide how much you are able
to borrow from your portfolio of securities.
Problems of Structure of Capital Market in Bangladesh
Some Problems of Structure of Capital Market in Bangladesh can be identified as follows-
 There is a lack of transparency in the accounting of the BO.
 The Book Building System should be closely monitored.
 Serial trading is a common kind of fraud.
 Insider trading is a well-kept secret5.
 Faulty audit reports of publicly traded corporations are rampant.
 Failures of an overwhelming number of Merchant Banks to perform their functions

 The behavior of institutional investors.
 The erroneous activities of commercial banks.
 Supervision of the Bangladesh Bank.
 Defective functioning of the DSE and CSE.
 The SEC has established itself as a weak and inefficient regulator.
 The SEC's institutional capacity is lacking, which is number 12.
 The absence of effective enforcement of norms and regulations.
Math Portion
Problem-1: You purchase 300 shares at tk. 80 a share. This transaction is done on margin, which
has an annual interest rate cost of 7%. The selling price of the share at a tk. 110. You pay
brokerage costs of 5%, and the tax rate is 6.5%.
A). Assume the margin requirement is 45%. Calculate the amount gain or loss on this position.
B). Calculate the percentage return on investment.
A).
Margin Loan = 24000 * 65% = 15600
Interest = 15600*7% = 1092
If the market value of the share is Tk. 110;
Selling 33000
- Buying Share 24000
9000
- Commission 2850
6150
- Interest 1092
5058
- Tax 328.77
Total gain 4729.23
B).

Percentage Return = (Price changes + Cash Dividend – Interest expense – Commission –
Tax)/Margin money paid
= (110-80)*300+0-1092-2850-328.77
= 4729.23
Problem-2: The first margin requirement is 40% of the total amount of money that is being
borrowed. There is a stock that costs Tk. 70 per share, and you have Tk. 20,000. Assuming no
taxes or commissions are paid, show how your rate of return would change if the stock rises to
Tk. 110 a share and falls to Tk. 30 a share, assuming no taxes or commissions are paid.
a). The stock is paid for in cash, and you receive the shares in the form of a dividend.
b). To get the best possible price, you use as much leverage as possible.
a).
Assume you pay cash for the stock;
No. of shares purchases = 20000
70 =286 shares.
If the stock is later sold, the price will be Tk. 110.
The sales price of shares = 110*286 = 31460
Rate of return = 31460−20000
31460 = 36%
If the stock is later sold for tk. 30 per share, the profit is tk.
Sales price of shares = 30*286 = 8580
Rate of Return = 8580−20000
20000 = -57%

b). The leverage factor for a 70% margin requirement is, if you utilize all of your available
leverage to acquire the stock = 1
% of margin requirement
= 1
0.70 . = 1.43
Thus the rate of return on the stock if it is later sold at Tk. 110 = 36%*1.43 = 51%
In contrast, the rate of return on the stock if it is sold for Tk. 30 a share;
= -57%*1.43
= 82%
Problem-3: An investor has conducted a thorough analysis of a stock during a one-year holding
term. The stock is presently trading at 40 per share, but it does not pay a dividend, and there is a
sixty-forty percent possibility that it will trade at 50 or 55 cents per share by the end of the year.
What is the expected return and risk if 240 shares are purchased with 70 percent of the funds
coming from borrowing? Assume that the cost of borrowing funds is 10% of the total amount
borrowed. (Commissions and taxes are not included.)
Calculation of Probable return
Year-end prices (Pi- P0)
Return (%)
[(Pi-P0)/P0]*100
50 10 25
55 15 37.5
Calculation of Expected Return
Probable return
(Xi)
Probability
p(Xi)
Product
Xip(Xi)
25 0.6 15
37.5 0.4 15
Calculation of Standard Deviation

Probable Return
(Xi)
Probability
p(Xi)
Deviation
(Xi-x̄)
Deviation squared
(Xi-x̄)2
Product
(Xi-x̄)2p(Xi)
25 0.6 -5 25 15
37.5 0.4 7.5 56.25 22.5
Calculation of Standard Deviation
Probable Return
(Xi)
Probability
p(Xi)
Deviation
(Xi-x̄)
Deviation squared
(Xi-x̄)
Product (Xi-
x̄)p(Xi)
25 0.6 -5 25 15
37.5 0.4 7.5 56.25 22.5
σ 2 37.5
Variance, σ2= 37.5
Standard deviation, σ = 6.12
Return and risk of buying 240 shares
Investment in 240 shares = 240*40 =9600
Borrowed funds = (9600*70%) = 6720
Expected return from 240 shares;
Gross return = 9600∗30
100 =2880
Less: Interest at the rate of 10% on borrowed funds
= 6720∗10
100 = 672
Net return = (2880 – 672) =2208
Risk in Investing in 240 shares = 9600∗6.12
100 = 658

Conclusion:
A country's economy relies heavily on the capital market, which serves as a go-between for
investors and businesses looking to raise funds for growth. The stock market in Bangladesh is
primed for substantial growth. In order to accomplish this, the SEC, DSE, CSE, and all other
market participants should collaborate with government assistance. Confidence in the market
will be shaken if different authorities send inconsistent signals. Investors, on the other hand,
must realize that in any stock market there are ups and downs, and they cannot blame others
when stock prices fall. The good news is that investors are becoming more mature, and perhaps
we won't have to watch shouting and slogans in front of the exchanges anymore. Improved
governance and the development of advanced market products, such as futures, swaps, and other
similar instruments, should be top priorities for Bangladesh.
References:
Saha, A. K. (2012). Capital Market in Bangladesh: An Overview. International Journal of
Science and Research (IJSR), 1(3).
Rahman, M. T., & Moazzem, K. G. (2011). Capital market of Bangladesh: volatility in the
Dhaka stock exchange (DSE) and role of regulators. International Journal of Business and
Management, 6(7), 86.
Mujeri, M. K., & Rahman, M. H. (2009). Financing long term investments in Bangladesh:
Capital market development issues (No. id: 2060).
Rasul, M. S. (2013). Barriers to the development of Bangladesh capital market. International
Journal, 2(6).
Islam, M. S., & Jahan, S. (2012). Analysis of financial products of capital market in Bangladesh:
present status and future development. International Journal of Marketing Studies, 4(5), 119.
Rahman, S., & Hassan, M. K. (2011). The Potential of Derivatives Market in
Bangladesh. Journal of Economic Cooperation & Development, 32(4).
Shah, S. A. M. (2016). Capital market development in Bangladesh: A sector reform perspective.