Money Market: The money market is where financial instruments with high liquidity and very short maturities are traded. It is used by participants as a means for borrowing and lending in the short term, with maturities that usually range from overnight to just under a year. There are several money market instruments, including treasury bills, commercial paper, bankers' acceptances, deposits, certificates of deposit, bills of exchange, repurchase agreements, federal funds, and short-lived mortgage- and asset- backed securities.
Present state of capital market: The primary issues and secondary
trading of equity securities of capital market take place through two (02)
stock exchanges-Dhaka Stock Exchange and Chittagong Stock Exchange. The
instruments in these exchanges are equity securities (shares), debentures and
corporate bonds. The capital market is regulated by Bangladesh Securities and
Exchange Commission (BSEC). After the crash of 1996, the capital market of
Bangladesh has attracted a lot more attention, importance and awareness and a number of investment-friendly
regulatory reforms relating to public issue, rights issue, acquisition, and
mergers have been implemented by the Securities and Exchange Commission (SEC).
Over the last few years, the capital market of Bangladesh has witnessed a
haughty growth which is not in line of development in the real sector of the
economy. Although, the Securities and Exchange Commission (SEC) of Bangladesh
has tried to correct the irregular behavior observed in the market, very often it is argued that lack of proper and firm decisions
from the regulator’s side has contributed to make the market more unstable rather than to reduce it.
Reasons behind the Frequent Fluctuations: Committee identify following broad
factors that caused the capital
market disaster recently:
a) Primary Issue related
Problems:
·Direct listing in Primary issue
·Abuse of
Book Building Method of IPO · High premium
for stock listing
-Illegal
Private placement market
·Asset Revaluation of Companies before listing to
charge higher premium.
b) Secondary market related problems:
- Circular trading in Secondary market
- Block trading
-Stock
Price Manipulation through Omnibus Accounts
c) Irregularities in issuance of Right Share/Preference
Share/Repeat IPO etc.
d) Recommendation of Stock Dividend by companies against
unrealized Profits.
e) Regulatory Failure:
- Inconsistency in regulatory activities
- Supporting and legalization of unethical activities of Big Investors · Irresponsible Behavior/Weakness in many areas
- Formulating policies to support market Players
(Manipulators) · Lack of Due
Diligence.
- Lack of Co-ordination between SEC and Stock exchanges.
- Allowing Financial Institutions to invest in capital
market aggressively.
- SEC Failed to take measure against manipulation of
financial statements.