The Securities & Exchange Commission of Bangladesh took appropriate measures to separate different intermediary functions. Accounts of brokers, dealers and that of investors are clearly separated. A central depository is in place now. Most brokers use automated back office besides using on line trading system. A number of cities are connected to the main trading system. The IPO distribution and pricing will be automated soon and we will have a securities institute, a learning centre, soon.

The ADB prescription was a general one. The recommendations were similar, of not totally same, for the other countries in the region. In some countries, the reforms are successful and distinctly visible. In others, the effects are not so evident. In Bangladesh, the ADB reforms were not as effective as expected and as it was observered in other neighboring countries. Nevertheless, it is good to see that SEC was not only busy with the implementation of ADB prescription. SEC, albeit a small organisation in terms of manpower and financial resources, it managed to devise some investor friendly tools and implemented those. In particular, the categorisation of A, B and Z groups was a wonderful one and welcomed by the general investors. The AGM defaulter companies are on their toes to get things streamlined. Chittagong Stock Exchange brokers are trading from 5 cities of the country. The network of Dhaka Stock Exchange is also upgraded. There are stories of disappointment and decision reversal, but in general, the total picture of the stock market is much better and cleaner now, than it was ten years ago.

The most reputed business people of the country had remained aloof from the stock market, at least collectively for a long time. On the contrary, recent ICC, B conference on the capital market was a landmark attention of the private sector business leaders. Stock market is necessarily private sector mechanism. Private sector attention is therefore seen to be a spirit for fast future growths.

However, that does not mean that we already have a great market. A number of issues have remained unattended in the capital market. In the economic world map, Bangladesh market is yet to make a place. Many markets, smaller than Bangladesh is displayed in the world media and attract international investors, whereas, ups and downs of Bangladesh stock market is not news at all in the world forums.

The setback that drives away investors' eye from Bangladesh is primarily a high degree of uncertainty. The fluctuation of foreign currency or share price is not a fear. The apprehension is all about changes in regulations, future development and lack of trust worthy services. The efforts of the exchanges and the SEC risk will be marred if these issues are not addressed soon. Investors at home and abroad do not know what is going to happen in Bangladesh in short or medium run. Therefore a preparation visible roadmap can be recommended.

A definite roadmap
The road map should be chalked out by a group of academicians in economics, finance and law and market participants under the leadership of the commission. If required experiences from neighbouring countries can be studied for a quick and inexpensive understanding. We have to take a path which many have already traveled.

The road map should cover at least two aspects -- regulatory sides and products.

Regulations
In the market there are regulations to comply with. The game rules are of extreme importance in the capital market. These game rules vary from country to country and the international investors shop for their best suited set. The set of regulations not only control the players, but also depict the level of maturity of the market. The domestic investors also need to know about the coming changes. As it is a shallow market in Bangladesh, the roadmap is also very important for the companies to be listed from the market. They need to compare among their sources of finance. Share market is an alternative to them and if it is characterised by uncertainty, entrepreneurs discard that.

The stock market is a crowded playground. The players range from well-informed investors to rumourmongers, from gambler to clean-handed risk taker. The rules and regulations need to be a balanced set to promote the market and at the same time to control it. The evolution to reach equilibrium and stability can not be achieved over a short period. A series of changes are required. The changes sometimes catch the investors by surprise. And investors do not like to be surprised.

Let's take a couple of instances. The lock-in system that is the restriction of sale of shares by sponsors has been changed several times in last ten years. Sponsors are caught by surprised and their long term plan to invest is distressed. Sponsors are entrepreneurs and they intend to divest their fund from one sector to then invest in another; from one country to another as and when opportunities come. These movements for business and profits are not sin, but they are the natural driving force of investment, job creation and mover of economy. Rules like lock-in exist in many countries for protection of small investors. However, these rules should be consistent and the people who are subject to these rules should know what they are and when they are going to change. Sudden changes of rule may cause large investors huge loss and they may shy-out of the market for long time if such thing happens.

Settlement cycle has to be reduced. Nevertheless, it is a complex process and involves sophisticated banking transaction. Settlement cycle is gradually reduced and international recommendation to bring it down to instant delivery versus payment is the target. But we do not know when we should get best settlement cycle. A roadmap, well prepared with specific time frame would tell the world our progress path. This particular task is a very major one as it will require coordination with the banking system. Unfortunately the coordination between our banks and stock market is yet to reach a desirable routine matter. An agreed roadmap could compel all the quarters to sit down and deliver good for the betterment of the economy.

Products
Bangladesh capital market is not fully equipped. We only have equity share and a nominal presence of corporate bond. An attempt to bring in government bond under the open marker mechanism was taken early this year. However nothing happened in practical. A prudent roadmap prepared prior to exchanges and bank conversation would minimise the complicated exchange of views on different frequencies.

In the neighbouring markets there are derivatives and commodity markets. Our investors do not have clear idea about futures and options although it could help the business a great deal in risk management and bringing more money in circulation. We do not have derivative market at the moment. But that does not mean that we do not need it.

Derivative market requires a lot of effort. As it takes long time and a complex process, we should have a roadmap specifying time and resource allocation. Training, system development, rule framing, all these components will require sequencing.

Commodity trading is a formal business in all the developed and also in the developing countries. In the USA when electricity is being traded in advance, we are only having a mechanism of tea trading, which is century old. Other commodities, in particular those affect the painful inflation in special seasons, e.g., rice, onion can be brought under the purview of automated market mechanism. These may not be under the existing stock exchanges, but very similar apparatus can be devised to make transaction transparent and efficient. Commodity markets are viewed as complementary and supplementary to the equity market. We will need it.

After the recent Saarc summit, we can hope that Safta is going to be implemented. In the beginning it will involve only the tangible commodities. But over the time, after initial success, it is obvious that service sector will be focused. If Bangladesh is lacking behind in the capital market development, it will be a grave problem regarding investment and capital flow. A roadmap is therefore an urgent need.

Wali-ul-Maroof Matin is the former CEO of the Chittagong Stock Exchange Ltd. Currently, he is the resident consultant, Capital Markets Unit, Bank of Sierra Leone, Freetown, Sierra Leone.