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known as bid price and the price at which 
the specialist is ready to sell is known as 
ask price. The specialist also mentions the 
quantity of securities s/he is ready to buy 
or sell at the quoted prices. The quotes 
cannot be changed unless there is at least 
either a buy or a sell transaction taking 
place. There should however be continuity 
in the quoted prices of the specialist.  

The basic idea of market making is that 
there will be a transaction, regardless of 
whether an investor comes to buy or sell 
security. For example, someone orders 
for buying 100 shares of a securities but 
no one is there to sell the security. If there 
is no specialist available for the security, 
the broker of the investor cannot execute 
the transaction. However, if there is a 
specialist who is ready to buy and sell 
certain quantities of the security that is 
available in the market, the transaction 
will take place. The broker of the investor 
will be able to execute the transaction at 
the specialist’s “ask” price. In this case, 
the specialist acts as the market maker. 
Market maker will always be there as 
an intermediary to take the opposite part 
of the transaction. This is what market 
making is all about.   

Members of organized exchanges may 
participate and act as a broker, a dealer 
and a specialist. When the members of 
an exchange facilitate the transactions of 
their clients, they are acting as a broker. 
Members of an exchange also obtain 
license to buy and sell securities in their 
own account. In this role the members act 
as “dealer”. On request from the members, 
the stock exchange will authorities appoint 
certain members as “specialists”. For 
any one security there will be only one 
specialist. However, a member of the stock 
exchange will be specialist for more than 
one security. In our stock exchanges, there 
is provision for a member to be specialist 
for a maximum of five securities. In Dhaka 

Stock Exchange (DSE) there are around 
250 brokerage houses and in Chittagong 
Stock Exchange (CSE) there are about 
150 houses. If any of them decides to be 
market maker or a specialist for securities, 
the brokerage firm needs to apply to the 
authority of DSE or CSE. If the respective 
committee of DSE and CSE finds the 
brokerage firm meeting the requirement, 
the brokerage firm would be appointed as 
a market maker. 

As per the rules of Bangladesh, in order to 
be a market maker, brokerage houses need 
to meet certain minimum requirements. 
Previously there was a requirement to have 
a minimum capital of BDT 50 crore, but 
this has been reduced now. 

What kind of benefits and challenges 
will the introduction of market maker 
bring for the Bangladesh capital 
market?

Liquidity is important for capital market 
securities, such as, stocks and bonds. 
These securities are long-term securities. If 
investors cannot sell their securities before 
their maturities, they would not invest in 
these securities. Therefore, issuers would 
not be able to issue securities to the public 
to raise fund. That is why these securities 
are listed and traded in stock exchanges. 
Stock exchanges provide liquidity. In 
absence of market markers, there could 
be securities which are not traded because 
there is none to take opposite position in 
the transaction. Specialists, i. e. market 
makers, take the opposition position to 
ensure that the transactions are executed. 
This not only makes the transaction more 
liquid but also increase the volume of 
transaction thereby providing additional 
liquidity to the securities. This is the main 
benefit of having market makers in the 
stock exchange. The secondary benefit 
of the market makers come through the 
generation of information generated by 

market markets though the research they 
conduct on the securities they specialize. 

We do not have any market maker in 
Bangladesh. Therefore, there are no 
transactions in a large number of securities 
making these securities highly illiquid. 
Ensuring that securities will be smoothly 
traded in the stock exchange is a big 
challenge for our stock exchanges.  One 
cannot be a market maker simply by 
possessing money, they should also have a 
strong research team. In quoting prices of 
the securities, market makers must be very 
careful. They should know what should be 
the appropriate prices of the securities. For 
that they must collect information as soon 

We do not have 

any market maker 

in Bangladesh. 

Therefore, there are 

no transactions in 
a large number of 
securities making 

these securities 

highly illiquid. 

Ensuring that 

securities will be 

smoothly traded in 

the stock exchange 

is a big challenge for 
our stock exchanges.