DSE plans to launch financial derivatives market by January 2028

The Dhaka Stock Exchange (DSE) plans to introduce financial derivatives on its exchange-traded platform by January 2028, as the market regulator and the bourse are working on the rules, technology and risk-management systems needed for the new products.

A financial derivative is a contract between two or more parties whose value depends on an underlying asset, group of assets, or benchmark. The Bangladesh Securities and Exchange Commission (BSEC) is positive about launching derivatives, but says the market must first be properly prepared to handle the risks involved.

“Derivatives can create new investment and risk-management opportunities, but without proper preparation, they can also create additional risks in the market,” BSEC Commissioner Nafis Al Tarak said on Monday.
He said a time-bound roadmap has already been prepared with a target of launching derivatives by 2028.

The commission is now working on necessary changes to existing rules, introducing a Central Counterparty (CCP) system and strengthening the technological and institutional capacity of the Central Counterparty Bangladesh Limited (CCBL).

“The derivatives market cannot be launched properly without an effective CCP,” Nafis said.

He also stressed the need to improve the skills of brokers, traders and other market participants and build the necessary technological infrastructure.

The commissioner made the comments at a stakeholder awareness and consultation programme organised by the DSE in Dhaka on Monday to discuss the introduction of financial derivatives on the exchange-traded platform.

DSE Managing Director Nuzhat Anwar said the introduction of new financial products would be an important step towards developing the country's capital market.

She said the DSE and BSEC had already prepared a roadmap and timeline for the initiative, adding that the process would move forward in phases based on feedback from market participants.

She also said the DSE would arrange more detailed workshops and awareness programmes on derivatives in the future.

DSE General Manager of the Market Development Division, Saiyid Mahmud Zubayer, said the exchange was planning to launch derivatives in January 2028 and had already submitted a strategy and action plan to BSEC.

He said the DSE planned to introduce its own index-based Stock Index Futures in the first phase. Single Stock Deliverable Futures would be introduced in the next phase, followed by an Options Market in the longer term.

According to him, preparations are moving ahead with support from the BSEC to put in place the required regulatory framework, technology and market-participant capacity.

BSEC Executive Director Md Abul Kalam said index derivatives could be introduced relatively easily through cash settlement, but successful implementation would require a strong regulatory, technological, clearing, settlement and risk-management framework.

He said the existing Exchange Derivatives Rules would be updated to create a modern regulatory framework.

The authorities also plan to introduce a derivatives trading platform, CCP, real-time margining, position monitoring and mark-to-market systems.

The progress of preparations will be monitored regularly according to the agreed action plan and timeline, he said.

Market participants, including leading brokerage firms, merchant banks, asset management companies and other stakeholders, attended Monday's programme.

The consultation was aimed at increasing awareness about derivatives and gathering views from market participants on the opportunities, challenges and preparations needed before the new products are introduced.

Nafis said derivatives, particularly futures, can give investors more options to hedge portfolio risks. They can also help investors manage risks linked to market liquidity and volatility.

He said BSEC, the DSE, CCBL and other market participants would have to work together to ensure that the planned derivatives market is introduced safely and within the set timeline.