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Surveillance at DSE

Market Surveillance ensures orderly market in light of regulatory compliance and detects manipulative and abuse trading pattern. Surveillance Department of Dhaka Stock Exchanges (DSE) plays a vital role in ensuring safety and integrity of the markets. The Department has been set up with a view to keep a proactive oversight on the surveillance activities of DSE. All the instruments traded in the market come under the Surveillance umbrella of DSE.

The main objective of the Surveillance function of the Exchange is to promote market integrity in the following ways:

• By monitoring price and volume movements (volatility) as well as by detecting potential market abuses at a nascent stage, with a view to minimizing the ability of the market participants to influence the price of the scrip/scrips in the absence of any meaningful information.
• By managing default risk by taking necessary actions timely.

Market Abuse is a broad term which includes abnormal price/volume movement, artificial transactions, false or misleading impressions, insider trading, etc. In order to detect aberrant behavior/ movement, it is necessary to know the normal market behavior.
The department carries out investigation, if necessary, based on the preliminary examination/analysis and suitable actions are taken against members involved based on the investigation.

Surveillance activities at the Exchange are divided broadly into following two major segments:

1. Price Monitoring : Price monitoring is mainly related to the price movement/ abnormal fluctuation in prices or volumes etc.
2. Position Monitoring : The position monitoring relates mainly to abnormal positions of members, Dealers, Institutions and General Investors in order to manage default risk.

1. Price Monitoring

The functioning of the Price Monitoring is broadly divided into following activities:

On line Surveillance
One of the most important tools of the Surveillance is the On-line Real Time Surveillance system with main objectives of detecting potential market abuses at a nascent stage to reduce the ability of the market participants to unduly influence the price and volumes of the scrips traded at the Exchange, improve the risk management system and strengthen the self-regulatory mechanism at the Exchange. The system provides facility to access trades and orders of members.

Off-Line Surveillance
The Off-Line Surveillance system comprises of the various reports based on different parameters and scrutiny thereof.

2. Position Monitoring

The Surveillance Department closely monitors outstanding exposure of members on a daily basis. For this purpose, it observes various off-line and on-line market monitoring reports. The reports are scrutinized to ascertain whether there is excessive purchase or sale position build up compared to the normal business of the member, whether there are concentrated purchases or sales, whether the purchases have been made by inactive or financially weak members and even the quality of scrips is considered to assess the quality of exposure.

Others
Rumor Verification

• Liaising with Compliance Officers of companies to obtain comments of the company on various price sensitive corporate news items appearing in selected News Papers.
• Comments received from the companies are disseminated to the market by way of online news bulletin.
• Investigations based on rumor verifications are carried out, if required, to detect cases of suspected insider trading.

Review Media Information
To scrutinize press articles or other media on the daily basis, the news relevant to the share prices of companies.

Market Intelligence
The rumors floating in the market are verified with the data available with DSE, Newspapers, Television news channels & Reuters to ascertain the national & global factors affecting the market sentiments. This enables the Exchange to avert market problems before it causes a serious damage.