The country's maiden commodity exchange (CX) will function as a new segment of the Chittagong Stock Exchange (CSE), not a subsidiary as was initially planned, since the new arrangement will help quicken the introduction of the market.
It will be just another platform of the port city bourse, similar to the SME board, sources said.
Had the CSE stuck to the plan, the bourse would have had to undergo a process stipulated by the Registrar of Joint Stock Companies and Firms.
The CX as a separate entity should have an independent board and paid-up capital for trading in standardized commodity contracts and related investment products.
Now, the CSE's existing board and paid-up capital will serve the purpose.
Mohammad Rezaul Karim, spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), said the existing rules had a provision allowing CX as a separate entity or as a segment of any stock exchange.
The CSE has been offered with a waiver in line with the rules so that it runs the CX as an extended part.
"But clearing and [trade] settlement will be separate. Even the chief operating officer of the CX must be separate," Karim said.
Any entity willing to be part of the CX as a commodity trader will have to acquire a TREC (trading right entitlement certificate) from the exchange.
The paid-up capital of new TREC holders should be at least Tk10 crore, enabling them to participate in the operations of the equity market as well.
The existing TREC holders of the CSE will also be able to join the CX if they meet the capital requirement.
Hence, the number of the CSE's TREC holders will rise following the introduction of the CX, with an enhanced opportunity to diversify investments.
The CSE had made a move to launch CX with a paid-up capital of Tk400 crore and a board having a majority of independent directors.
Veering off the course, the BSEC on March 20 issued a conditional licence to the port city bourse for launching of a CX in a shorter period of time.
Licence given conditionally
The condition is relevant to ABG Ltd, an entity of Bashundhara Group.
ABG Ltd became a strategic partner of the port city bourse, purchasing its 25% shares.
Stock and Security Linkway, a CSE TREC holder and a concern of ABG Ltd., has a stake of around 0.51% in the CSE.
As a result, ABG's stake in the CSE has exceeded 25%. But the demutualization scheme does not allow any strategic partner to hold more than 25% stake in the exchange.
Hence, the BSEC said ABG would have to transfer the additional shares to a separate entity having no affiliation with it -- within three months after the issuance of the CX licence.
In May 2022, Bashundhara Group applied to the securities regulator for a licence to operate a private commodity exchange. The plea was rejected.
In November of the same year, ABG Ltd became a strategic partner of the CSE.
The objective of introducing the long-awaited CX is to ensure fair pricing of commodities.
