Dhaka Stock Exchange will launch its own book building software tomorrow to upgrade the IPO system.

The new book building software, developed by the DSE, will replace the existing ones provided by a Dubai-based software company Infotech, officials said.

Book building is a process through which an issuer attempts to determine the price to offer for its security, based on demand from institutional investors.

The price of an IPO (initial public offering) share is determined through automated bidding joined by different financial institutions. The shares are then opened for the IPO participants at the bidding cut-off price.

Swapan Kumar Bala, a commissioner of Bangladesh Securities and Exchange Commission, will inaugurate the software on the DSE premises.

The software will have some new characteristics which will give users some extra advantages and facilitate regulatory alterations, expansions, additions and reductions faster, DSE officials said.

RAK Ceramics (Bangladesh) was the first company that used the book building system for its IPO in 2010. MJL Bangladesh and MI Cement Factory also used the mechanism for their IPOs in 2011.

After that the method was suspended for a while and then revised by the regulator following the 2011's market crash.

United Power Generation and Distribution Company was the first company that applied the revised book building system last year.

Now the system is mandatory for companies that intend to offer primary shares with premium prices to raise capital from the public.

The stockmarket regulator last year made the book building mechanism mandatory for the premium seekers to ensure the accountability and responsibility of issuer companies, issue managers, auditors and other stakeholders.

Only the companies that will offer primary shares at face value are allowed to use the fixed price method for their IPOs.