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as they are available and process them 
immediately so that the prices they quote 
reflect the new information. Otherwise 
there is a danger that they would lose at 
the end. Most of our brokerage houses 
do not have the needed research capacity. 
This is another big challenge that we have 
in Bangladesh in bringing market makers 
in our stock exchange.

Since the inception of the Market 
Maker Rule in 2000, no institution has 
come forward to register as a market 
maker. Do you feel the law requires 
some amendments to encourage 
institutions to join as a market maker?

In 2000 we got the rule of Market Maker, 
but no institution has showed interest to 
become a market maker so far.  I have 
identified main challenge for someone to 
be a market maker. Perhaps this is the main 
reason why we do have market makers in 
our stock exchanges. Another important 
reason relates to high volatility of prices 
of securities traded in our stock exchanges. 
The prices of securities in our markets 
fluctuate a lot, making market making very 
difficult. Due to this volatility, one might 
sell off a security while incurring a loss 

and all these can happen due to the lack 
of market information and sentiment of the 
market. 

Recently we have been witnessing sharp 
fall in prices of most securities for reason 
unrelated to company‚Äôs fundamental 
information. Liquidity shortage in 
the banking sector, tightening money 
supply, the result of downward revision 
of advance-deposit ratio by Bangladesh 
Bank and delayed resolution of selecting 
strategic partner by the DSE are cited as 
reasons for the current bearish mood in our 
stock exchanges. Market making in such 
volatile market is always a big challenge. 
Perhaps our brokerage houses are not yet 
ready to take on this challenge. Therefore, 
I do not feel by bringing in any changes in 
the Market Maker Rule, we can encourage 
brokerage houses to come forward to act 
as market makers. 

What role can a market maker have in 
the processing of IPO through the book 
building method?

There is no additional role for market 
makers to play here, since they can now 
participate in the IPO process as a broker. 
The participants in the book building 
method are eligible institutional investors. 
Brokerage houses EIIs. So, if they want to 
participate to buy securities against their 
quota of IPOs, they can do it. In book 
building process we cannot differentiate 
between a market maker and a brokerage 
house. When securities brought through 
IPO process will start trading in the 
secondary market, market makers will 
have a role in making the market like any 
other securities. 

The rule of market maker is vital 
for making exchange-traded funds 
functional. Do you feel the absence of 
one in our market will be a barrier for 
our ETF market?

An ETF (exchange traded funds) is a 
marketable security that tracks an index, 

a commodity, bonds, or a basket of assets 
like an index fund. For instance, if we 
convert our All Share Price Index DSEX, 
into a security and arrange trading of the 
security it will be called an ETF.  If suppose 
a commodity is being traded somewhere 
and if we want to sell a price index of that 
commodity or suppose we want to sell a 
security based on a portfolio of several 
securities, all we have are ETFs. One can 
confuse ETF with Mutual Funds. However, 
the main difference between these two is 
that the Net Asset Value (NAV) of mutual 
funds can be calculated. For ETF, the NAV 
calculation is not possible. 

Market makers create ETFs and provide 
liquidity to them by arranging trades of 
these funds in the stock exchanges. Market 
makers also help ensure the market price 
of each ETF unit reflecting the value of it's 
underlying securities intraday. Therefore 
market makers are needed for the smooth 
trading of ETFs.

A market maker is allowed to make 
30% short selling of its total sales on 
a particular securities in a day. What 
impact will this have on the stock 
market?

In our country we should allow the practice 
of short selling both on individual and 
institutional investors. Short selling is 
a practice in which an investor borrows 
a certain quantity of a security and sell 
them immediately. This is a common 
practice in most stock exchanges, like in 
USA. Investors earn profit by short sell in 
declining price trend. If an investor believes 
that price of the security will further decline, 
s/he would short sell the security. If his/
her prediction turns out to be true, she will 
make profit by buying the security at lower 
price and return it to the broker/dealer. 

Short selling helps to cool down very hot 
markets. When the prices of securities 
increase and move above their intrinsic 

Liquidity shortage in the 

banking sector, tightening 

money supply, the result 

of downward revision 

of advance-deposit ratio 

by Bangladesh Bank and 

delayed resolution of 

selecting strategic partner by 

the DSE are cited as reasons 

for the current bearish mood 

in our stock exchanges. 

Market making in such 

volatile market is always a 

big challenge. 

INTERVIEW