Presentation on

Operations of Brokerage House

Group Members1. Morjina Sultana ID-170

2.Nargis Akhter ID-1233.Zinia Akhter ID-132

10.Saima Sadiah ID-1629.Afroza Akhtar ID-144

4.Sifat Ara Bashar ID-1355.Rashida Ahsana ID-156 6.Afroja Begum ID-95

7.Farhana Yesmin ID-1678.Mollika Akter ID-114

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 11th century ,the French began

regulating and trading agricultural debts on behalf of the banking community creating the first brokerage system.

In 1300s , 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 10th 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:-

Brokerage firm

Full service

Online investing

Deep discount

Discount

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 firmsHow much money you have to investLevel of knowledge in stock investingNumber of tradesKind of servicesHow comfortable are you using a computer

and do you have access to reliable internet network.

Stock broking servicesThey 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

Broker

ClientStock

exchange

Screened Based Trading System

The advancement of ICT.

An advanced trading system over the cry out market.

Dematerialized shares.

Upgraded client part application software.

Central depository reserve.

BO account.

3.5 Trading Screen:

Benefits of MSA plus increase of brokerage house

InvestorEmpowerment of the brokerage houseNumber of per trader terminalIntra day instrument graphDetermination of value limitAPISome terminal and stationReduction of the load on the networkCentral 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 bankStep-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)Partnership1)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 resolution4)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 Its easiest if the NRB is in

Bangladesh to open the BO account for investment .

Then the NRB can go to abroad and continue applying for IPO’s and trading in the secondary market.

Very soon investors will be able to buy/sell orders so their brokers online.

Collect the relevant forms from your preferred brokerage house via mail.

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.

Very soon investors will be able to place orders to their brokers online.

How to Start with AccountsBO Account

Trading Account

NITA Account

What are the Benefits of NRB?

10% of all issued IPO are reserved for NRB.

No capital n0 tax.Minimum 60% of NRB Mutual Funds are

reserved for NRB.Individual Income Tax will not be more than

15%.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

Fund Manager

International Broker

BO with CDBL Local stock Exchange

Local Broker

Local Custodian

Global custodian

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

BrokerCustodian Confirm fund

BO

Electronic share

Payment

Broker BOElectronic

share

Payment

Place order

Trading system of exchange

Foreign Investor

Custodian

BO/omnibus BO

Electronic share

Broker

Sell Order

Confirm share availability

after execution

Sale proceed advanced

Sale proceed

Electronic share

Trading system of exchange

Place order

Broker BO

CDBLCDBL was incorporated as a public limited

company on 20th 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……???????

CDBL Broker Investor Portfolio

How buying and selling are happening?

CDBL fees………..

Earnings of a brokerage houseCommission 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 1:2Omnibus 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

Broker and Agent

Broker and Jobbers

Dealer and Broker

Brokers buy or sells things for people.Underwriters underwrites insurance policies

especially for ships.

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 is a retailer.Jobber is a wholesaler.

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(2nd floor),

Motijheel C/A, Dhaka.

A.K. KHAN SECYRITIES LTD.Uday tower(9th floor),Gulshan-1, Dhaka.

A.L. SECURITIES LTD.Modhumita building(6th floor),

Motijheel, Dhaka.

A.M. SECURITIES LTD.111, Bir Uttam C.R Datta

road,Dhaka.A.R. CHOWDHURY SECURITIES

LTD.Stock exchange building,9/f,

Motijheel, Dhaka.

AB & COMPANY LTD. Room;505, 9/f, Motijheel, Dhaka.

AB SECURITIES LTD. WW tower(6th floor),68, Motijheel, Dhaka.

ABDUL HYE.Gulshan Model town, Dhaka.R

A.B.S. SAFDAR & CO. LTD.DSE anex building, Motijhel, Dhaka.

ACE CAPITAL MANAGEMENT SERVICE LTD.

Ellal chamber, 11 Motijheel, Dhaka.

Brokerage Operation

Instrumental operation Transactional Operation

Trading

Client orderBuy Sale

Assessment of purchase power from

portfolio

Assessment of saleable quantity

from portfolioOrder submission on TESA/VECTOR

Execution Documentati

on

Buy

Sell

Trade confirmation

Filling up buy-sell order form

Settlement

Stock Money

Thank you