Stock Market in Bangladesh: DSE, CSE and the Capital Market

Bangladesh's stock market is the meeting point between the country's household savings and its companies, and for most of its seventy-year life it has been a small, turbulent corner of a bank-dominated financial system. Two exchanges — the Dhaka Stock Exchange (DSE), founded in 1954, and the Chittagong Stock Exchange (CSE), founded in 1995 — list the shares of about 360 companies under the supervision of the Bangladesh Securities and Exchange Commission (BSEC). The market has produced two of the most dramatic boom-and-bust episodes in South Asian financial history, in 1996 and again in 2010–11, and the reforms that followed those crashes — electronic trading, a central depository, new indices and the demutualisation of the exchanges themselves — define how it works today. Yet by the measure that matters most, size against the economy, it remains one of the smallest stock markets in the world relative to GDP.

Origins of the Dhaka exchange

The market's origin lies in a decision taken elsewhere. In early 1952 the Calcutta Stock Exchange prohibited transactions in Pakistani shares and securities, leaving the jute mills, tea estates and trading houses of East Pakistan with no bourse of their own. Eight promoters, with M. Mehdi Ispahani as convener, incorporated the East Pakistan Stock Exchange Association Limited on 28 April 1954. Formal trading began in 1956 at Narayanganj, then the centre of the jute trade; the exchange moved to Dhaka in 1958 and into its own building in the Motijheel commercial district in 1959. It was renamed the East Pakistan Stock Exchange Limited in 1962 and the Dacca Stock Exchange Limited in 1964 — today's Dhaka Stock Exchange.

By the eve of independence the exchange listed 196 companies with paid-up capital of about Tk 4 billion. Trading was suspended in December 1971, during the Liberation War, and the socialist economic policies of the first post-independence years kept it shut. It reopened only on 16 August 1976, after a policy shift towards the private sector, with just nine listed companies and paid-up capital of Tk 137.52 million. Through the 1980s the market grew slowly; an all-share price index was introduced in September 1986, later recalculated on a formula designed by the International Finance Corporation.

A regulator, a second bourse and the electronic age

The institutional framework of the modern market was built in the 1990s. The Securities and Exchange Commission (SEC) was established on 8 June 1993 under its own act, as a statutory body attached to the Ministry of Finance — the first dedicated capital-market regulator, taking over work previously scattered under older company and capital-issues law. In December 2012 the commission was renamed the Bangladesh Securities and Exchange Commission (BSEC).

A second exchange followed. The SEC licensed the Chittagong Stock Exchange in February 1995; it was incorporated on 1 April 1995 and began open-outcry trading in the port city that October. The CSE's lasting claim on the market's history is technological: in June 1998 it introduced the country's first fully automated, nationwide online trading system, and the DSE replaced its cry-out floor with automated trading two months later, on 10 August 1998. The third piece of infrastructure arrived with Central Depository Bangladesh Limited (CDBL), incorporated in 2000, whose central depository system began operating in January 2004. Paper share certificates gave way to electronic holdings in Beneficiary Owner (BO) accounts — a change aimed squarely at the forged and duplicate certificates that had plagued the paper era.

The 1996 bubble

The new framework was tested almost immediately, and failed. Between July and November 1996, shares on both exchanges rose in a frenzy fed by rumour, margin money and manipulation. The DSE's market capitalisation rose by about 265 per cent in five months and average daily turnover more than tenfold; the benchmark index, which had stood near 1,000 points in mid-1996, peaked at about 3,650 in November 1996. Prices of some companies multiplied many times over regardless of earnings.

The collapse, when it came, lasted years: by May 1999 the index had fallen to 462 points, and small investors across the country were ruined. A government probe committee formed on 26 December 1996 under Aminul Islam, vice-chancellor of Jahangirnagar University, reported in March 1997 that listed companies and some of the country's biggest brokers had been involved in rigging the market. The SEC filed 15 cases against 38 individuals, eight listed companies and the leading brokerage houses — and then the cases largely disappeared into the courts. Trials before a special tribunal began producing verdicts only from 2015, almost two decades later, a delay that itself became part of the market's institutional memory.

Boom, bust and the Khaled report

A generation later, the pattern repeated at larger scale. Through 2009 and 2010 the market climbed steeply as bank liquidity, easy margin lending and millions of new BO accounts chased a limited supply of shares. The DSE General Index (DGEN) rose from 4,708 in January 2010 to a record 8,918.51 in December 2010. Roughly three million investors, many of them first-time savers, were in the market when the bubble burst in December 2010 and January 2011. Over the course of 2011 the DGEN fell about 37 per cent, and around Tk 891 billion of market value was wiped out.

This time the official response was faster. On 27 January 2011 the government appointed a probe committee headed by Khondkar Ibrahim Khaled, a former deputy governor of Bangladesh Bank. Its 320-page report, submitted on 7 April 2011, set out 15 case studies of manipulation, pointing to the abuse of omnibus accounts — which pooled many investors' holdings under a single name — irregular placement shares issued ahead of listings, and misuse of the book-building method for pricing IPOs. The report's recommendations reached beyond punishment: it called for the securities regulator to be recast and for the stock exchanges, still owned by their broker-members, to be demutualised. The commission was duly reconstituted under a new chairman in May 2011, and its renaming as the BSEC in 2012 accompanied a wider rewrite of market rules.

New indices and demutualisation

Two reforms from that period still shape daily trading. On 28 January 2013 the DSE replaced the discredited DGEN with indices designed by S&P on free-float methodology: the DSE Broad Index (DSEX), which counts only shares actually available for trading, became the benchmark, alongside the DS30 index of thirty blue chips. A Shariah-compliant index, the DSES, followed in January 2014. The DSEX remains the headline number quoted for the market.

Demutualisation took longer. The Exchanges Demutualisation Act was passed in April 2013 and the DSE became a demutualised, for-profit exchange that November: 40 per cent of its shares went to the brokers holding trading rights (TRECs), 25 per cent was reserved for a strategic investor and 35 per cent for the public. In 2018 a consortium of China's Shenzhen and Shanghai stock exchanges bought the strategic quarter — 450.94 million shares at Tk 21 each, about Tk 947 crore — bringing a board seat and a technology partnership. The CSE's strategic sale came in 2022, when ABG Limited of the Bashundhara Group bought 25 per cent at Tk 15 a share. The final step, offloading the exchanges' reserved 35 per cent to the public, was still incomplete in the mid-2020s; the CSE sought approval in 2025 to list its shares on the Dhaka bourse, while its separately licensed commodity exchange — approved in March 2024 as the country's first — remained unlaunched into 2026 amid a regulatory dispute over its strategic partner's total shareholding.

How trading works today

Trading on both exchanges is fully electronic and screen-based, and most CSE-listed companies are also listed in Dhaka, so the DSE accounts for the overwhelming share of turnover. Investors hold shares electronically in BO accounts with the CDBL and trade through TREC-holding brokerage houses. Listed shares are sorted into categories — A, B, G, N and Z — according to whether companies hold annual general meetings and pay dividends; the Z category holds companies that fail those tests or have stopped operating. Settlement runs on a T+2 cycle for ordinary shares, meaning cash and shares change hands two working days after a trade, while Z-category shares settle on T+9. The regulator has been moving the market towards a shorter T+1 cycle, a change still being implemented in 2026.

The market in numbers

Measured in November 2026, the market is modest beside the economy it serves. The DSE lists about 360 companies; counting mutual funds and the government's treasury bonds, which are also listed on the exchange, there are more than 650 listed securities. Total market capitalisation stood at Tk 6.99 lakh crore at the end of June 2026, equal to 11.42 per cent of GDP — and nearly half of that headline figure is listed treasury bonds rather than shares. The capitalisation of listed companies alone was about $26 billion in World Bank data for 2025, one of the lowest ratios to GDP of any significant economy. On 10 November 2026 the DSEX closed at 5,436.74 with turnover of Tk 658.50 crore — a fairly typical recent day, with daily turnover through the autumn of 2026 running between roughly Tk 450 crore and Tk 660 crore. Brokers argue the market needs daily turnover of at least Tk 1,500 crore to function healthily.

Foreign investors are a small presence. Their holdings were worth about Tk 13,000 crore in September 2026, spread across only about 132 of the 360 listed companies; the largest foreign stakes are in blue chips such as BRAC Bank, where foreigners hold around a third of the shares. Foreign trading turnover rose by about a quarter in 2025–26, and index provider MSCI's decision to resume implementing review changes for its Bangladesh indexes from November 2026 was welcomed by brokers — but foreigners were net sellers in October 2026, a reminder of how quickly sentiment turns.

Unfinished business

The criticisms levelled at the market are longstanding and structural. Financial shares dominate: banks alone accounted for about 22 per cent of equity market capitalisation in October 2026, the largest single sector, and with non-bank financial institutions and insurers the financial bloc outweighs all others — meaning the market rises and falls with the health of the banking system rather than the wider economy. The largest single stock, Grameenphone, was worth about Tk 32,137 crore in October 2026. Free float is thin, because sponsor-directors and governments hold large blocks of most listed companies, so relatively few shares actually trade. And the pipeline of new listings is weak: the DSE's own chairman acknowledged in 2025 that no IPO had been approved in a year, while many of the country's biggest conglomerates and garment exporters — the core of the real economy — remain unlisted family businesses.

Against that, regulators point to a reform agenda in motion in the mid-2020s: rewritten public-offer rules published at the end of 2025, updated margin and mutual-fund rules, the planned T+1 settlement cycle, an SME board and the CSE's pending commodity exchange. Whether these measures finally deepen the market — after two crashes, one demutualisation and three decades of promises — is the open question hanging over Motijheel. What is not in doubt is the market's resilience as an institution: an exchange founded for the jute trade in 1954 now channels the savings of millions of Bangladeshis, and its next chapter will be decided by whether good companies can be persuaded to join it.