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Currency exchange rate risk to decline

Regulatory body Bangladesh Securities and Exchange Commission (BSEC) has taken an initiative to diversify its products and services in the country’s capital market. As part of the initiative, Chattogram Stock Exchange (CSE) is going to introduce Forex trading or foreign currency transaction service under the derivatives market. CSE wants to introduce ‘currency derivatives in a bid to reduce currency exchange rate risk.

If it is launched, the size of the capital market will increase, and will see new hopes. At the same time, along with the establishment of a full-fledged derivatives market, the reputation and image of the country will increase in the international capital market.

ABG Ltd, a subsidiary of Bashundhara Group, one of the country’s leading industrial conglomerates, is providing full support in introducing Forex trading in CSE. They are providing advices and technical supports to CSE in this regard.

However, Bangladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank have a major role in launching this system. If BSEC and Bangladesh Bank support properly, CSE will be able to launch the forex trading quickly.

Usually Forex means the global foreign currency exchange and exchange rate market. Where traders, investors, concerned institutions and banks can buy, sell and exchange currencies of different countries around the world. CSE wants to launch such a platform under currency derivatives.

According to Bangladesh Bank’s directives, Forex trading is currently prohibited in Bangladesh. If this platform is launched, those who trade with foreign currency in various ways, will get huge benefits.  Besides, those who are currently performing Forex trading illegally or without permission, will be allowed to trade under the platform.

In neighboring countries India and Pakistan, the USD currency is traded in the derivatives market. It is also traded in brokerage houses. About 60 percent of the turnover in the Indian capital market comes from the derivatives market. According to sources in CSE, the bourse has got a licence to open the derivatives market. There is a huge potentiality in this sector but there is an obligation in the law, as a result BSEC has been requested to amend the Securities and Exchange Ordinance, 1969.

CSE believes there is a huge potentiality in this sector and the country’s national interest will be protected if the system is introduced.

Meanwhile, there is a direction of Bangladesh Bank in prohibiting virtual asset and currency transactions and refraining from providing assistance in exchange/transfer/trade related businesses.

On October 12 last year, Bangladesh Bank sent letters in this regard to the managing directors and chief executives of the banks. The letters said it has been noticed that various foreign Virtual Asset Service Providers (VASPs) are using bank accounts to transact, buy, sell, resell virtual currency, crypto currency, foreign currency etc. through their websites/apps.

Resale of virtual asset using a customer’s bank account, person to person (PTP) exchange/transfer/activities relating to trading or assistance in any such activities shall be stopped immediately with an aim to avoid possible financial and legal risks due to transactions and their exchange/transfer/trading activities of virtual assets and virtual currency (virtual currency/crypto currency). Side-by-side, monitoring activities should be increased by taking proper precautions in this regard. The central bank has issued this directive under the powers given in Section 445 of the Bank Companies Act, 1991.

Meanwhile, Bangladesh Bank’s Financial Intelligence Unit (BFIU) in its annual report for the fiscal year 2021-22 highlights the virtual currency and online Forex trading of the last five years. The report cited that Suspicious Transaction Report (STR) and Suspicious Activity Report (SAR) are on the rise through virtual currencies and online Forex trading. The BFIU says the first report on virtual currency and online Forex trading is found in the fiscal year 2017-18. In the report, figures are available as per age, gender, occupation. When asked in this regard, Managing Director (acting) of Chattogram Stock Exchange (CSE) Golam Farooq told risingbd: ‘I have placed a proposal to Bangladesh Bank (BB) and Bangladesh Securities and Exchange Commission (BSEC) regarding the introduction of Forex or foreign currency transactions under financial derivatives as a new product in the capital market. Basically, this initiative has been undertaken to diminish the risk of foreign exchange rate in the country.

The BSEC has a legal consent to introduce commodity derivatives market. However, nothing is said in the law about introducing financial derivatives or currency derivatives. Therefore, legal assistance and consent from the BSEC have been sought in this regard. ABG Limited is giving full support to the CSE in this work. They are very interested in introducing Forex trading. They are providing advices and technical assistance in this regard.’ In this regard, BSEC Chairman Professor Shibli Rubayat-Ul-Islam told risingbd: ‘The CSE has placed a proposal regarding the introduction of forex or foreign currency transactions under financial derivatives as a new product in the capital market. We are pondering over it. It will come under commodity and derivatives.’ A Forex expert requesting to be unnamed told risingbd, ‘Currently, a syndicate in Bangladesh is trading unlawfully in the Forex market. When it gets connected to the international market, this syndicate will be broken. Then it will be possible to do business lawfully. Afterwards, the Bangladeshi currency will be added to the Forex market and it will be traded in realtime with the international market. As a result, the price of dollar or other currencies will remain under control in the country. To sum up, if the Forex market is introduced, the capital market of Bangladesh will rise to a new height.’

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