The Dhaka bourse continues to incur an annual cost of $1.1 million to maintain its Order Management System (OMS) even though over 70 per cent market turnover is executed by large houses using their own OMS.
According to data from the Dhaka Stock Exchange (DSE), as many as 56 brokerage firms out of 272 active houses have stopped using DSE's OMS following the introduction of their own systems that enabled them to ensure better services to clients.
Top 40 brokerage firms, among the 56, account for around 70 per cent of the daily transactions in the secondary market. Although most brokers rely on the free OMS service, the costly platform handles only one-third of daily market transactions.
Despite repeated instructions to the brokers, they remained reluctant to introduce their own OMS.
Brokers' individual OMS tends to be more efficient than a common platform connected to all intermediaries and ensures better protection to investors.
Globally, brokers of most stock exchanges conduct transactions through their own systems.
As the DSE has continued to provide the OMS service for free, its income dwindled - from Tk 1.13 billion in FY21 to Tk 312 million in FY25.
FlexTrade, a US-based financial technology company, is the vendor of the OMS of the Dhaka bourse. The DSE in 2024 renewed its contract with the company for the period until December 2027 for annual payment of $1.1 million.
The DSE has been providing order management services to clients since the automation in 1998.
"So, brokers regard the free service as a legacy entitlement," said a DSE official preferring anonymity.
The firms that have already introduced their own OMS include Midway Securities, IDLC Finance Securities, LankaBangla Securities, City Brokerage, and BRAC EPL Stock Brokerage.
Asked, the managing director of Midway Securities, Md. Ashequr Rahman said they needed their own system to give best services to clients.
"If you want to be a modern stock exchange, you need to adopt modern technologies," he said.
LankaBangla Securities was the first broker that put in place its own OMS in 2022 on receipt of FIX (Financial Information eXchange) certification from the DSE.
FIX allows brokerage houses to connect their trading platforms directly to the exchange's matching engine, enabling faster and more efficient order execution for investors.
Later, other brokerage firms received the FIX certification. DSE officials said some applications for FIX certification are on the pipeline.
Mr Rahman said initially brokers invested a huge amount of money to introduce separate OMS. The cost has declined significantly. Nevertheless, many have refrained from adopting the technology.
"The Dhaka bourse has no logic of bearing the cost burden," he added.
Apart from the fact that most brokers are unwilling to spend money on OMS, many of them also lack technical knowledge to run such a system, another DSE official said, preferring anonymity. In such cases, vendors can facilitate OMS operations, he added.
Advantages of brokers' own OMS
Under the exchange's OMS, clients of a brokerage firm are allowed to make purchases on completion of a time-consuming process after funds are deposited into a consolidated customer's account (CCA). Clients' funds have to be validated by the bank concerned and then the relevant broker's risk management team asks traders to offer the purchase limits.
On the other hand, clients of a firm having their own OMS get purchase limits automatically immediately after the deposition of their funds into the CCA. As clients directly enter the trading system of the firm, they can conduct transactions without any intervention or help.
As the trading system under a broker's own OMS is connected to the broker's back office software, clients also can see the position of their shares and funds. So, the scope of embezzling clients' funds becomes narrow.
