Friday, 28 March 2014

And the exchanges responded ....

In reference to the last two postings, it is good to notice that both exchanges (Bursa and SGX) have responded in a timely fashion.

SGX is rectifying its web-page issues

MAS takes a serious view of market misconduct

"Since 2008, criminal prosecutions have successfully led to convictions in 33 market misconduct cases. In the same period, MAS [Monetary Authority Singapore] has successfully obtained civil penalty judgments in 4 cases before the Singapore Courts, as well as entered into 14 civil penalty settlements. Importantly, all these settlement agreements include an admission of liability by the offender."

That sounds indeed not bad, and I like especially the last part, on Bursa too many parties are allowed to "escape" without admission of liability in cases of possible insider trading.

However, "since 2008" is quite a long time, six plus years, how many cases were investigated in total, and in how many cases complaints were filed of possible misconduct? That would give an indication of the success rate of the enforcement.

Also, how many cases ended in a jail sentence (the only punishment that really counts, in my humble opinion)?

Bursa to go on public engagement sessions

"Bursa Malaysia Bhd plans to embark on a series of public engagement sessions with retail investors to further address certain issues that were raised at its AGM."

That sounds good and proactive.

I still can remember years ago that I complained to Bursa about the RM 40 minimum brokerage fee. Quite a few counters that I was interested in had rather low trading volumes, and a large spread between the highest buyer and lowest seller price. I usually put in a buy order of a decent size at the middle between those two prices, but sometimes was rudely surprised finding out that only 100 shares were bought (once at a price around RM 0.50), and that the brokerage in percentage of the order was much too high for comfort.

I also gave two pretty simple solutions:

  • either raise the minimum board lot size for shares trading at lower prices (in Hong Kong for instance penny stocks go in lots of 10,000 shares)
  • or lower the minimum brokerage for these small orders.

Bursa answered that I should just buy at the sellers price and sell at the buyers price, if I had a problem with the brokerage fee.

Needless to say, this advice equates to a one way ticket to the poor house and I was pretty disappointed about the answer, also about the tone of it.

I also approached MSWG who came with a better solution: if say half an hour before the closing a small amount of a trade is done, then one could try to buy at a somewhat higher price, since the brokerage will count for both orders.

In itself good advice, but not always practical, for instance, I don't always have time to monitor my trades.

The situation is the more surprising, since low (or no) volume is a real problem on Bursa, even today, despite the fact that the market has had a very nice run-up since 2009 and many people must have made money, at least on paper.

On a day like today, 146 out of 992 main board counters (15%!) are not traded at all (and many other counters only for small amounts). The percentage of untraded counters for the ACE market is higher, at 20%, and for structured warrants it is a whopping 76%.

Hopefully Bursa Malaysia will look seriously into this problem of the high minimum brokerage, and come with a proper solution.

No comments:

Post a Comment