The Dhaka Stock Exchange has planned to make indices tradable at the market so that investors can make profits in all sorts of market conditions.
The bourse will also introduce new indices for the purpose, DSE officials said.
The DSE at a meeting with its strategic partner on July 4 discussed the issue, they said.
A Chinese consortium of Shenzhen Stock Exchange and Shanghai Stock Exchange joined the DSE as strategic partner on September 4 last year.
A stock index is a collection of stocks that gives an overview of how a specific part of the stock market is performing. Index trading is a type of trading of a group of stocks which make up the index.
Index trading allows investors to make profits from any kind of stock market movement, no matter how the market moves over any given time period. This kind of trading enables investors to trade and make profits in all sorts of market conditions.
Only eligible investors like financial institutions, stock dealers and institutions approved by market regulator Bangladesh Securities and Exchange Commission will be allowed to be index traders, DSE officials said.
DSE officials said that the bourse would create a number of indices like sectorial indices and then make them tradable.
The Chinese consortium also agreed to display those indices in their web site to promote the Bangladesh capital market, they said.
The strategic partner of DSE will support promotion of DSE’s indices in China and facilitate local wealth management firms to develop products based on DSE indices licensing.
The consortium will support the Bangladesh’s premier bourse in developing a number of indices and give necessary technical supports regarding implementation of the plan.
An index trader can make profits through successfully capturing the changes in prices over a short period of time — in minutes, days or weeks.
Index price movements are affected by factors like political events, issues which impact companies in a particular sector, economic data and significant changes in the exchange rates.
The platform will provide investors with greater opportunity and lower the risk of exposure to extreme volatility.
Indices are good analysis tools and good trading tools as they provide information for a basket of stocks, and not for just one.
The indices cannot be traded directly, but there are products that allow traders to participate in the movements of stock indices.
DSE officials said that the index trading facility would pull varieties of investors to the market as investors could
make profits even in a bearish period.
The country’s capital market remained volatile in recent months, eroding the investors’ profits as well as their confidence over the market.
Market experts said the product variety could help the market flourish and investors would take the capital market as a better option for investment.
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