The absence of an active secondary market for Fixed Income Securities in Bangladesh can be attributed to several factors:
i. Weaknesses in Legal and Regulatory Regime: The legal and regulatory framework may not be robust enough to support the growth and operation of an active secondary market.
ii. Widespread Corporate malpractice: Instances of corporate malpractice can erode trust in the market, making it less attractive for investors.
iii. Limited Market Infrastructure: Inadequate infrastructure, including trading platforms, clearing and settlement systems, and market intermediaries, can hinder the development of an active secondary market for fixed-income securities.
iv. Lack of Investor Awareness: Limited awareness and understanding among investors about fixed-income securities may contribute to a lack of demand. Investors might not be fully aware of the benefits and risks associated with these instruments.
v. Issuer Concentration: If a significant portion of fixed-income securities is issued by a few entities (e.g. government or a small number of corporations), it can lead to concentration risk and reduce the diversity of available securities in the secondary market.
vi. Limited Range of Instruments: A narrow range of fixed-income instruments, such as bonds or debentures, can limit the choices available to investors and may result in a less dynamic secondary market.
vii. Regulatory Barriers: Stringent regulatory requirements or lack of a conducive regulatory framework may hinder market participation. Regulatory obstacles can include restrictions on foreign participation, complex compliance procedures, or unfavorable tax treatment.
viii. Thin Investor Base: A limited number of institutional investors, such as pension funds, insurance companies, or mutual funds, may result in a thin investor base. Diversifying and expanding the investor base is essential for a vibrant secondary market.