Presentation on Operations of Brokerage House Group Members

Presentation on Operations of Brokerage House

Group Members 1. Morjina Sultana ID-170 2. Nargis Akhter ID-123 3. Zinia Akhter ID-132 4. Sifat Ara Bashar ID-135 5. Rashida Ahsana ID-156 6. Afroja Begum ID-95 7. Farhana Yesmin ID-167 8. Mollika Akter ID-114 9. Afroza Akhtar ID-144 10. Saima Sadiah ID-162

Definition of brokerage house �A brokerage house is party that arranges transaction between a buyer and a seller, and gets a commission when the deal is executed. �A brokerage house who also acts as a seller or as a buyer becomes a principal party to the deal. �Distinguish agent: -one who acts on behalf of a principal.

Why brokerage house…? ? ?

History of brokerage house…. �During the 11 th century , the French began regulating and trading agricultural debts on behalf of the banking community creating the first brokerage system. �In 1300 s , houses began to be set up in the major cities like Flanders and Amsterdam. �In 1602 the Dutch east India company became the first publicly traded company. �The early twenty first century saw a rise of online trading.

�But the earliest brokerage firms were established in London coffee houses, enabling individuals to purchase stocks from a variety of organizations. They formally founded the London stock exchange in 1801. �Soon the US exchange was moved to New York city and various firm like Merrill Lynch was created to assist in the brokering of stocks and securities.

History of brokerage house inside Bangladesh. �Listing of small number of companies after the establishment of DSE ltd. in 1964. �Government initiative after liberation war. �Cry out system-which was prevailed until 1996 when the share market collapsed. �Abomination of cry out system and installation of fully automated computerized system on 10 th august 1998. �Implemented broker control over trader in 2001. �Implemented broker control over client in 2005. �Implemented ACS system in April 2006. �In June 2009 developed secured broker network with DSE.

Brokerage firm can be classified as: Full service Discount Broker age firm Deep discount Online investing

� 1) full service brokerage firm: they offer the most services but commission and fees are the highest. They are known for their extensive research, exclusive advice, as well as a full range of other financial services. 2)Discount firm: -they offer some services such as demitted advice and research. However, they may change a minimum fee on all trades. 3)Deep discount firm: -they offer little other than a way to trade and some customer service. They offer low on no minimum fees too. 4)Online investing: -it requires both the investors to be comfortable with using computer and to have access to a reliable internet connection.

How to choose stock brokerage firms �How much money you have to invest �Level of knowledge in stock investing �Number of trades �Kind of services �How comfortable are you using a computer and do you have access to reliable internet network.

Stock broking services �They are three types: 1) Execution only: -broker will only carry out the clients institution to buy a sell. 2) Advisory dealing: -broker advices the clients on which shares to buy and sell. 3) Discretionary dealing: -broker ascertain the clients investment objectives and then make all dealing decisions on the clients behalf.

Trading System Stock exchange Client Broker

3. 5 Trading Screen: Screened Based Trading System The advancement of ICT. An advanced trading system over the cry out market. Upgraded client part application software. Dematerialized shares. Central depository reserve. BO account.

Benefits of MSA plus increase of brokerage house �Investor �Empowerment of the brokerage house �Number of per trader terminal �Intra day instrument graph �Determination of value limit �API �Some terminal and station �Reduction of the load on the network �Central depository system

What is a BO account? �This is the account that holds your shares like an inbox holding all your emails �How to open a BO account to involve in share business: Step-1: open an account at bank Step-2: select a suitable stock broker or brokerage house. Step-3: collect a BO account opening form. Step-4: documents needed to open a BO account.

a) If you are an individual applicant: 1)two copies of passport size photograph 2)National ID card or photocopy of passport or bank statement or driving license or nationality certificate, two copies of passport size photograph of nominees. b) Joint applicant: same as individual applicant.

c)Sole trader/proprietor: 1)Trade license d)Partnership 1)Partnership agreement or resolution of partners to operate the BO account. e)Corporate Account: 1)Photographs of the directors. 2)Photocopy of national id card or photocopy of passport/driving license/nationality certificate. 3)Board resolution 4)Memorandum and articles of association. 5)Signature and photograph of the authorized person if any. Step-5: -Submit the documents with account opening fee to the brokerage house. Step-6: -Account will be opened within 3 days to 1 month.

NRB and Relating Issues Who are NRB? Valid status Valid work permit Dual citizenship

From where should an NRB open his accounts? Home and Abroad! Home Abroad Ø Its easiest if the NRB is in Bangladesh to open the BO account for investment. Ø Then the NRB can go to abroad and continue applying for IPO’s and trading in the secondary market. Ø Very soon investors will be able to buy/sell orders so their brokers online. Ø Collect the relevant forms from your preferred brokerage house via mail. Ø Fill it and send the forms back to the brokerage house with the Nominee and the POA part filled in and send the POA to the brokerage house. Ø Very soon investors will be able to place orders to their brokers online.

How to Start with Accounts BO Account Trading Account NITA Account

What are the Benefits of NRB? Ø 10% of all issued IPO are reserved for NRB. Ø No capital n 0 tax. Ø Minimum 60% of NRB Mutual Funds are reserved for NRB. Ø Individual Income Tax will not be more than 15%. Ø Can also trade in the secondary capital market while abroad through Nominee in local currency.

A Foreign Investor A foreigner residing in Bangladesh or abroad willing to invest in Bangladesh Capital Market are considered as foreign investor.

How to start? 1. Open NITA Account with AD. 2. Select custodian in Bangladesh. 3. Open BO through custodian. 4. Open trading Account with preferred broker. Start Trading

The flow of investment activity: Foreign Investor Global custodian Fund Manager Local Custodian International Broker Local Broker BO with CDBL Local stock Exchange

NITA Account Non -resident Investment Taka Account An Account for channeling foreign currency as well as repatriation or earnings from investment.

Foreign Investor Buy Order SWIFT Custodian Confirm fund Broker BO Place order Payment Electronic share Broker BO Electronic share Payment Trading system of exchange

Foreign Investor Sell Order Custodian BO/omnibus BO Electronic share Confirm share availability after execution Place order Sale proceed advanced Broker BO Broker Sale proceed Electronic share Trading system of exchange

CDBL �CDBL was incorporated as a public limited company on 20 th August 2000 to operate and maintain the central depository system (CDS) �What is CDS? CDS is an electronic book entry system to record and transfer securities electronically without having any physical movement or endorsement of certificates. The services of CDBL: -

Participants of CDBL 1. stock brokers 2. Banks 3. Financial institutions 4. Insurance company 5. Merchant bankers 6. Asset managers 7. custodians 8. any other capital market inter mediaries registered with SEC

�Will all brokers be participant of CDBL……? ? ? ?

How buying and selling are happening? CDBL Broker Investor Portfolio

CDBL fees………. .

Earnings of a brokerage house �Commission A brokerage commission is a fee paid to a stock broker by a client for the purchasing or selling of shares in the stock market. The prescribed commission rate is 0. 25% usually a brokerage commission is calculated as a percentage of the total transaction. Total Transaction= Total Buy + Total Sell.

�Beside commission-some brokerages offer advisory and portfolio management services. �The fee paid for such services should not be confused with a brokerage commission. The brokerage commission covers expenses for the brokerage such as - transaction fee paid to the stock exchange -order handling fees etc.

Loan �Current loan margin is 1: 2 �Omnibus account -an omnibus account is formed when a brokerage firm groups together individual accounts to form a unified account at any financial organization like bank. -typically the financial organization carrying the omnibus account views the account as a single client and the company does not require gather or retain information about the individual accounts that make up the omnibus account.

Some differences: Between: Broker and Underwriter Brokers buy or sells things for people. Underwriters underwrites insurance policies especially for ships. Broker and Agent Broker, as a agent, is a broader term. While an agent has the power and authority to act on ones behalf, a broker is ones agent, Broker and Jobbers Broker is a retailer. Jobber is a wholesaler. Dealer and Broker trade security on his clients behalf. Dealer trade securities for his account.

Some brokerage house & Head Offices: A. B, ISPAHANI SECURITIES LTD. Ispahani building(2 nd floor), Motijheel C/A, Dhaka. AB & COMPANY LTD. Room; 505, 9/f, Motijheel, Dhaka. A. K. KHAN SECYRITIES LTD. Uday tower(9 th floor), Gulshan-1, Dhaka. AB SECURITIES LTD. WW tower(6 th floor), 68, Motijheel, Dhaka. A. L. SECURITIES LTD. Modhumita building(6 th floor), Motijheel, Dhaka. ABDUL HYE. Gulshan Model town, Dhaka. R A. M. SECURITIES LTD. 111, Bir Uttam C. R Datta road, Dhaka. A. B. S. SAFDAR & CO. LTD. DSE anex building, Motijhel, Dhaka. A. R. CHOWDHURY SECURITIES LTD. Stock exchange building, 9/f, Motijheel, Dhaka. ACE CAPITAL MANAGEMENT SERVICE LTD. Ellal chamber, 11 Motijheel, Dhaka.

Brokerage Operation Instrumental operation Transactional Operation Trading Buy Client order Sale Assessment of purchase power from portfolio Assessment of saleable quantity from portfolio Order submission on TESA/VECTOR Buy Execution Sell Documentation Trade confirmation Filling up buy-sell order form Settlement Stock Money

Thank you