Brokerage licence now just Tk 6 lakh

The Bangladesh Securities and Exchange Commission (BSEC) has finalised new regulations regarding issuance of brokerage licence allowing such businesses to be opened at a cost of just Tk 6 lakh.

The same licence was selling anywhere between Tk 30 crore to Tk 100 crore when the market was going bullish in 2010, according to a top Dhaka Stock Exchange (DSE) official.

According to the new regulations, a company or individual will have to spend Tk 1 lakh in applying for a Trec licence and once they get the approval, they will have to provide another Tk 5 lakh as registration fee.

But the new Trec holders will only get trading rights, not ownership of the stock exchange.

The Trading Right Entitlement Certificate (Trec) regulations, approved by the stock market regulator one week ago, is going to be made public through a gazette soon, according to a top official of the regulator.

"We want to open the business for all so that more entrepreneurs can come to the business and attract new investors," he said.

However, stock brokers say the BSEC's decision just devalued their brokerage licences by many fold.

Moreover, they have been struggling for many years for low turnovers and the arrival of new brokers will just add to their woes, said a top broker preferring anonymity.

The DSE's daily average turnover now ranges from Tk 350 crore to Tk 400 crore, which was around Tk 1,200 crore to Tk 1,500 crore on an average during the late 2010 bullish period to mid-2011.

"The lower turnover that the DSE is now witnessing is far below what was needed to book profits in the stock broker's accounts."

On the other hand, the lower paid-up capital for the new Trec holders may give rise to risks for stock investors, the broker added.

According to the new regulations, new Trec holders will need to keep Tk 5 crore as paid-up capital and an extra Tk 3 crore as deposit money.

Stock brokers who are also owners of the stock exchange are bound to keep a paid-up capital of Tk 15 crore as per a risk-based capital adequacy notification of the BSEC.

The DSE urged the BSEC to make it mandatory for the new Trec holders to keep Tk 10 crore as paid-up capital.

A company or investor seeking to jointly run a stock brokerage with a foreign entity will need to keep Tk 8 crore as paid-up capital and another Tk 4 crore as deposit money, according to the new regulations.

If any foreign entity wants to operate the business availing a Trec licence, it would need to maintain a paid-up capital of Tk 8 crore and deposit money of Tk 4 crore.

At present, there are 250 Trec holders. Of them 238 are active.