Algorithmic trading on the SGX: less clarity, more volatility
I'm never one to say things have to stay the same when new technology comes along. Resisting change is generally futile. That's particularly the case if new revenue streams can be earnt. But the Singapore Exchange's announcement of a partnership with SingTel to cut the processing time of trades to less than a millisecond from the current, oh-so-slow 4 milliseconds deserves further investigation. As always, whenever the exchange makes changes, there are winners and losers. In this case it appears the exchange is the winner, traders might be winners if they play their cards right, and investors are losers.
The point of the cut in the time it takes to consummate a trade from miniscule to even more miniscule is to allow traders to employ algorithmic programs. It's also called automated trading or program trading. It's when computers take over the job of brokers. There are some excellent articles around on this subject, such as this one from BusinessWeek a few years ago. The area of automated trading is an industry unto itself. There is even a magazine and a podcast on the subject.
Suffice to say, algorithmic trading will create:
1. Greater secrecy. It'll be harder to find out who's moving large positions because this will be done incrementally, and
2. Greater volatility. A third of all EU and US stock trades in 2006 were driven by automatic programs, according to this article on Wikipedia. That is, driven not by fundamentals but by technical trading.
It'll "enhance SGX's market liquidity and depth" alright. But I can't see how either of them will be good for investors. Recall, investors are those poor souls who buy stocks for what they're actually for: Dividend payouts and capital appreciation. There is already enough noise around to distract us from this. The last thing we need is to be tossed around by ever growing storms of volatility, and a decreased understanding of who is buying or selling what.
As I said, I am loath to critique new technology on the basis of resistance to change. It just means that investors will have to keep getting smarter. And not just investors. As Futures & Options Week points out, the increase in automated trading "presents a challenge to clearing operations" because lightning fast trades require lightning fast clearing. Let's hope the SGX is also geared up for that.
Mark Laudi, who fears the Singapore Exchange will become evermore Singapore's third casino.
To comment on this blog, go to the Investor Central blog.
Visit the brand new Investor Central website! for FREE SMS alerts to news about stocks in your watchlist.
The point of the cut in the time it takes to consummate a trade from miniscule to even more miniscule is to allow traders to employ algorithmic programs. It's also called automated trading or program trading. It's when computers take over the job of brokers. There are some excellent articles around on this subject, such as this one from BusinessWeek a few years ago. The area of automated trading is an industry unto itself. There is even a magazine and a podcast on the subject.
Suffice to say, algorithmic trading will create:
1. Greater secrecy. It'll be harder to find out who's moving large positions because this will be done incrementally, and
2. Greater volatility. A third of all EU and US stock trades in 2006 were driven by automatic programs, according to this article on Wikipedia. That is, driven not by fundamentals but by technical trading.
It'll "enhance SGX's market liquidity and depth" alright. But I can't see how either of them will be good for investors. Recall, investors are those poor souls who buy stocks for what they're actually for: Dividend payouts and capital appreciation. There is already enough noise around to distract us from this. The last thing we need is to be tossed around by ever growing storms of volatility, and a decreased understanding of who is buying or selling what.
As I said, I am loath to critique new technology on the basis of resistance to change. It just means that investors will have to keep getting smarter. And not just investors. As Futures & Options Week points out, the increase in automated trading "presents a challenge to clearing operations" because lightning fast trades require lightning fast clearing. Let's hope the SGX is also geared up for that.
Mark Laudi, who fears the Singapore Exchange will become evermore Singapore's third casino.
To comment on this blog, go to the Investor Central blog.
Visit the brand new Investor Central website! for FREE SMS alerts to news about stocks in your watchlist.
Labels: algorithmic trading, automated trading, program trading, Proximity Hosting Services, SGX, Singapore Exchange, SingTel
No news is bad news, and silence is not golden
Sometimes, disclosing what hasn't happened is as important as disclosing what has. And in this regard the Singapore Exchange is spot on (see end of this blog) when it praises companies which have provided updates on the impact of the earthquake in China on their businesses even though little or nothing happened to them. If only all companies did this on other occasions, too.
Talk to any 5-year-old and they'll tell you that not admitting to doing something wrong is not the same as lying. Conveniently forgetting to mention what hasn't happened is not the same as denying that they did something wrong, they say.
Fortunately, most SGX-listed companies are not run by 5-year-olds. Why is it, then, that the SGX had to "contact listed companies with known Sichuan operations" to establish whether the quake affected them.
Just as people visiting China would have phoned home to tell friends and relatives they're alright, SGX-listed companies with China connections should take the initiative to "phone home" to their part owners (that is, investors who bought their stock on the SGX) - even if they have nothing to say other than everything is okay.
So, we concur entirely with the SGX when it "encourages listed companies to continue heightened vigilance on disclosure" for the rest of the year, and the next fifty years (words and emphasis added).
This clearly should apply to all companies, but particularly those whose operations are in countries that are not easily accessible, where Singapore investors can go easily and see for themselves.
So, congratulations to those companies which have made announcements sofar in the last two days:
Anwell Technologies
China Eratat Sports
China New Town Development
Wilmar International
Sapphire Corp
China Dairy
China Zaino
Asia Water Technology
(Add your company name by making a comment, if you also did the right thing but are not listed here)
And special mentions to
CapitaLand
Radiance Electronics
Sino-Environment Tech
Sihuan Pharma
for contributing funds to the relief effort.
Mark Laudi, who wonders when Singapore companies with operations in Burma – such as DBS, UOB, OCBC, Keppel Corp, CNA Group and Shangri-La – will say something about whether the cyclone in Myanmar impacted their operations there.
To comment on this blog, go to the Investor Central blog.
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SGX Encourages Listed Companies to Continue Heightened Vigilance on Disclosure 15 May
SGX would like to extend our heartfelt sympathies and condolences to the people and families affected by the earthquake in China.
We have contacted listed companies with known Sichuan operations and been informed that most of them are unaffected by the quake. We also note that several listed companies have updated investors on the impact of the China earthquake on their businesses via SGXNET.
Listed companies are aware of their responsibility to make timely and accurate disclosure of material information. We encourage them to continue their heightened vigilance with regard to disclosure of material developments. In this connection, foreign listed companies can tap on their Singapore directors in the discharge of their disclosure responsibilities.
Labels: Anwell, Asia Water Technology, CapitaLand, China, China Dairy, China New Town, CNA, earthquake, Eratat, Keppel, Radiance, Sapphire, SGX, Shangri-La, Sihuan Pharma, Sino-Environment, Wilmar, Zaino
Jade Tech 'designated'. And here's another...
Congratulations to the Singapore Exchange for designating Jade Technology - meaning, the stock can no longer be sold short. Frankly, it was starting to bore us that each morning at our editorial meeting the top traded stock was… drum-roll please… Jade Tech. But we think there are a couple of other stocks which rank highly in the "eye-rolling" stakes, and qualify for special attention from the SGX, most notably E3 Holdings.
The stock formerly known as ei-Nets has been seeing a lot of volume, with 15 mln shares changing hands last Friday. Trading at 3 cents apiece that does not translate into a lot of money. But their announcement late March that a subscription agreement with Pacific Capital Investment Management Limited has been terminated.
Is it a coincidence that the venerable Dr Anthony Soh, who's also behind Jade Tech, is E3's President, and bought 280 mln shares in E3 Holdings worth almost S$10 mln just a month ago?
I haven't spoken to Dr Soh, and so I am not sure whether there is a relationship between the Jade Tech and the E3 Holdings announcements.
But it seems even if he cashed out this investment he still would fall short of the S$67 mln he needs to pay for the now-cancelled takeover of Jade Tech.
On the face of it it looks like whoever's been shorting Jade Tech is actually shorting Dr Anthony Soh, and is drawing E3 into it in the process.
Clearly, reading the articles and announcements about all the stuff that's gone down over this counter, there is more to it than a bunch of speculators getting hold of the stock. For example, the collapse of Australian stockbroker Opes Prime, and the investigation by the Securities Industry Council into the role played by OCBC Bank.
At the least Dr Soh could take comfort that he still has some money in the kitty, after his dream of taking over Jade Tech went down with Opes Prime.
Mark Laudi, who would like to extend an invitation to Dr Soh to appear on camera on Investor Central for a chat about what's been going on.
To comment on this blog, go to the Investor Central blog.
Visit the brand new Investor Central website! for free SMS alerts to news about stocks in your watchlist
The stock formerly known as ei-Nets has been seeing a lot of volume, with 15 mln shares changing hands last Friday. Trading at 3 cents apiece that does not translate into a lot of money. But their announcement late March that a subscription agreement with Pacific Capital Investment Management Limited has been terminated.
Is it a coincidence that the venerable Dr Anthony Soh, who's also behind Jade Tech, is E3's President, and bought 280 mln shares in E3 Holdings worth almost S$10 mln just a month ago?
I haven't spoken to Dr Soh, and so I am not sure whether there is a relationship between the Jade Tech and the E3 Holdings announcements.
But it seems even if he cashed out this investment he still would fall short of the S$67 mln he needs to pay for the now-cancelled takeover of Jade Tech.
On the face of it it looks like whoever's been shorting Jade Tech is actually shorting Dr Anthony Soh, and is drawing E3 into it in the process.
Clearly, reading the articles and announcements about all the stuff that's gone down over this counter, there is more to it than a bunch of speculators getting hold of the stock. For example, the collapse of Australian stockbroker Opes Prime, and the investigation by the Securities Industry Council into the role played by OCBC Bank.
At the least Dr Soh could take comfort that he still has some money in the kitty, after his dream of taking over Jade Tech went down with Opes Prime.
Mark Laudi, who would like to extend an invitation to Dr Soh to appear on camera on Investor Central for a chat about what's been going on.
To comment on this blog, go to the Investor Central blog.
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Labels: Anthony Soh, designated, E3, Jade Tech, SGX
SGX-Bursa link: do we really need it?
I have been a strong advocate of the trading link between the Singapore Exchange and Bursa Malaysia because it brings the two countries closer together, it fosters economic cooperation and it will likely add liquidity to both markets. It is heartening to read that they're finally getting it together. But while I hold firm to these points, it is merely stating the obvious that the trading link has been delayed so often that retail investors could be forgiven for thinking it will never happen. And now one wonders whether it actually should.
The fact is, Singaporeans can already trade on Bursa Malaysia using established brokers and networks (watch the video to find out which ones). Trading commissions may be higher, but it is unclear whether fees would come down when there is an electronic linkage between the exchanges. Presumably, the exchanges would justifiably seek some return on the extra infrastructure needed to establish the linkage.
The real issue is not so much the technology involved, although the long delays and integration of the technology have been frustrating enough. It's an issue of marketing. Our own Investor Central research has often found that investors - particularly at the retail end - much prefer to invest in the markets in which they live. That is as true of Singaporeans, as it is of Malaysians, Thais and the Chinese. It makes perfect sense: they like to buy stocks they are most familiar with.
Incidentally, the second highest preference of investors in these markets is the US market. Which also makes sense, given the prominence of US companies in the news.
If the SGX-Bursa link is to work, it will be more about achieving a familiarity with companies in each other's markets. It was this lack of familiarity, in the absence of a decent marketing campaign, lead to the demise of the SGX-ASX WorldLink in 2006.
Another issue, which hasn't been dealt with publicly, is the political aspect (watch the video to hear Mark's views on this). So, given all the technical and political difficulties that may arise out of a formal trading link, it may be wiser to focus a marketing campaign on the services which are already available in the market.
Mark Laudi, who is a particular fan of the Malaysian equities market because of the complementary investment opportunities it offers.
To comment on this blog, go to the Investor Central blog.
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The fact is, Singaporeans can already trade on Bursa Malaysia using established brokers and networks (watch the video to find out which ones). Trading commissions may be higher, but it is unclear whether fees would come down when there is an electronic linkage between the exchanges. Presumably, the exchanges would justifiably seek some return on the extra infrastructure needed to establish the linkage.
The real issue is not so much the technology involved, although the long delays and integration of the technology have been frustrating enough. It's an issue of marketing. Our own Investor Central research has often found that investors - particularly at the retail end - much prefer to invest in the markets in which they live. That is as true of Singaporeans, as it is of Malaysians, Thais and the Chinese. It makes perfect sense: they like to buy stocks they are most familiar with.
Incidentally, the second highest preference of investors in these markets is the US market. Which also makes sense, given the prominence of US companies in the news.
If the SGX-Bursa link is to work, it will be more about achieving a familiarity with companies in each other's markets. It was this lack of familiarity, in the absence of a decent marketing campaign, lead to the demise of the SGX-ASX WorldLink in 2006.
Another issue, which hasn't been dealt with publicly, is the political aspect (watch the video to hear Mark's views on this). So, given all the technical and political difficulties that may arise out of a formal trading link, it may be wiser to focus a marketing campaign on the services which are already available in the market.
Mark Laudi, who is a particular fan of the Malaysian equities market because of the complementary investment opportunities it offers.
To comment on this blog, go to the Investor Central blog.
Visit the new Investor Central website! for free SMS alerts to news about stocks in your watchlist
Labels: Bursa Malaysia, SGX, Singapore Exchange, trading link
The SGX's "Watch-List": Complete duds or hidden value?
The Singapore Exchange is to be applauded for trying to raise the standard of mainboard listed companies, but generating a list of those which fail to meet minimum standards. Companies which have reported consoliated pre-tax losses for the prior three years can find themselves on this list. If they don't improve, they could find their shares suspended or even delisted. But while the motivation is laudable, the criteria used to judge companies could be debated.
Right up front: this is not a recommendation to buy any shares, nor am I going into bat for these companies. Not least, because they didn't acknowledge their "spoon award" beyond the necessary disclosure, and explain how they were working to make sure they weren't on the list again in the future.
But I'm concerned the SGX is using a profit number, rather than cashflow, as the category to measure companies by (loss-making companies must also have a market capitalisation of S$40 mln or more to escape being named). As we all know, "profit is opinion, cash is fact". And because profit numbers can be affected by property revaluations and other arbitrary, non-cash measures, CFOs of the affected companies can find ways to escape being listed.
If we then look at cashflow instead of profits, five of the eight companies named on the first list could perhaps we cut some slack.
Watch the video to see what I mean.
Fact is: none of these companies are stellar performers. But if the list was compiled based on cashflow, not only would we quite likely see a very different list, we would also ensure that CFOs had no way to cook the books to get their way out of trouble.
Mark Laudi, who thinks this would have been a good opportunity to convert investors from focusing on profit to focusing on cashflow.
To comment on this blog, go to the Investor Central blog.
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Right up front: this is not a recommendation to buy any shares, nor am I going into bat for these companies. Not least, because they didn't acknowledge their "spoon award" beyond the necessary disclosure, and explain how they were working to make sure they weren't on the list again in the future.
But I'm concerned the SGX is using a profit number, rather than cashflow, as the category to measure companies by (loss-making companies must also have a market capitalisation of S$40 mln or more to escape being named). As we all know, "profit is opinion, cash is fact". And because profit numbers can be affected by property revaluations and other arbitrary, non-cash measures, CFOs of the affected companies can find ways to escape being listed.
If we then look at cashflow instead of profits, five of the eight companies named on the first list could perhaps we cut some slack.
Watch the video to see what I mean.
Fact is: none of these companies are stellar performers. But if the list was compiled based on cashflow, not only would we quite likely see a very different list, we would also ensure that CFOs had no way to cook the books to get their way out of trouble.
Mark Laudi, who thinks this would have been a good opportunity to convert investors from focusing on profit to focusing on cashflow.
To comment on this blog, go to the Investor Central blog.
Visit the new Investor Central website! for free SMS alerts to news about stocks in your watchlist
Labels: ASA Group, Chuan Soon Huat, Fastech Synergy, SGX, Singapore Exchange, Tri-M Technology, Unified Communications
SGX's review of fines: our contribution
We are delighted the Singapore Exchange is inviting comment on penalties for companies which flout exchange rules. Our own list of what actions should be classified as misdemeanours is not terribly scientific, but it is based on the common gripes retail shareholders voice about the stockmarket.
1. Perceptions of insider trading. We are not making any specific allegations, nor are we saying the SGX hasn't been doing a good enough job on enforcement. But I'm fed up to the teeth with stocks which have an out-of-the-ordinary day on the market, but the market-moving announcement doesn't come until after the market closes. And no one is held accountable for it. Fortunately, this doesn't happen often. But it happens often enough for us to roll our eyes, groan, and curse the fact that we're just retail investors who are left out in the cold.
2. Barring unforeseen circumstances… According to the template companies must complete when announcing earnings, they have to give an outlook:
Come on, if that's truly the depth of insight management has into the future of the company they're probably not worth investing in (from the crop of earnings stories tonight, kudos to Baker Tech, MAP Technology, Natural Cool and Showy International among others for being significantly more detailed in their statements, even if they had negative news to announce).
3. Press releases that only tell half the story. Listed companies probably know all too well that too many so-called business journalists just re-write press releases for a living. Hence, they often leave out the juicy bits from the press release and leave it to the statutory announcements, which fewer people read. We would promote a "truth-in press releases" goal. In the meantime, we would encourage shareholders to shun companies which don't have the courage to deal candidly and honestly with bad news in press releases, and we would encourage readers and viewers to shun journalists who don't read the statutory announcements and only re-write the press release.
What are your bug-bears?
Mark Laudi, who could rave all night about these issues.
To comment on this blog, go to the Investor Central blog.
1. Perceptions of insider trading. We are not making any specific allegations, nor are we saying the SGX hasn't been doing a good enough job on enforcement. But I'm fed up to the teeth with stocks which have an out-of-the-ordinary day on the market, but the market-moving announcement doesn't come until after the market closes. And no one is held accountable for it. Fortunately, this doesn't happen often. But it happens often enough for us to roll our eyes, groan, and curse the fact that we're just retail investors who are left out in the cold.
2. Barring unforeseen circumstances… According to the template companies must complete when announcing earnings, they have to give an outlook:
A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months.We wish fines upon companies which merely write:
Barring any unforeseen circumstances, the Directors of the Company expect the Group to be profitable for FY2008.This may be a statement of fact and meet the requirements, but it is nowhere near sufficient to contribute meaningfully to an investment decision. It's like saying, "unless something happens to us, we expect to still be around next year".
Come on, if that's truly the depth of insight management has into the future of the company they're probably not worth investing in (from the crop of earnings stories tonight, kudos to Baker Tech, MAP Technology, Natural Cool and Showy International among others for being significantly more detailed in their statements, even if they had negative news to announce).
3. Press releases that only tell half the story. Listed companies probably know all too well that too many so-called business journalists just re-write press releases for a living. Hence, they often leave out the juicy bits from the press release and leave it to the statutory announcements, which fewer people read. We would promote a "truth-in press releases" goal. In the meantime, we would encourage shareholders to shun companies which don't have the courage to deal candidly and honestly with bad news in press releases, and we would encourage readers and viewers to shun journalists who don't read the statutory announcements and only re-write the press release.
What are your bug-bears?
Mark Laudi, who could rave all night about these issues.
To comment on this blog, go to the Investor Central blog.
Labels: barring unforeseen circumstances, earnings statements, fines, insider trading, outlook, SGX, Singapore Exchange
SGX.com: a better gauge of future earnings?
Here is an interesting if unorthodox way of forecasting future earnings of the Singapore Exchange Limited. While most financial analysts focus their attention on trading volumes and the market outlook, you might like to ask the SGX's customers: investors and traders. And, it seems, they are voting with their feet.
Tens of thousands of people visit the SGX website each day for price data and information about companies. It is hugely popular (and largely not monetised). But when you look at the number of people visiting the SGX website, you see some startling results. This chart illustrates that interest is much lower now than in recent years. In fact, it's falling off a cliff.
Given the volatility in the market and concerns about recession it's perhaps not surprising that investors are staying on the sidelines. My concern is, they're not just staying on the sidelines. They're not even watching the game!
Measuring web traffic is unorthodox, as I've said. It is also unscientific. The chart doesn't show absolute numbers of visitors. It just shows the percentage of visitors to their website, compared to total internet traffic. Conceivably, the reason why the SGX website garners a lower percentage of total web traffic is that there are many more people who've logged on but are visiting other websites. But even this would indicate that while interest in other areas of the internet is growing, not so the SGX website.
But just as economists count employment ads and pages of advertisements in newspapers to gain a pulse-check on that country's economy, perhaps financial analysts would do well to track website visits as well as the usual round of financial information.
Mark Laudi, who is still watching the game, very closely
To comment on this blog, go to the Investor Central blog.
Tens of thousands of people visit the SGX website each day for price data and information about companies. It is hugely popular (and largely not monetised). But when you look at the number of people visiting the SGX website, you see some startling results. This chart illustrates that interest is much lower now than in recent years. In fact, it's falling off a cliff.
Given the volatility in the market and concerns about recession it's perhaps not surprising that investors are staying on the sidelines. My concern is, they're not just staying on the sidelines. They're not even watching the game!
Measuring web traffic is unorthodox, as I've said. It is also unscientific. The chart doesn't show absolute numbers of visitors. It just shows the percentage of visitors to their website, compared to total internet traffic. Conceivably, the reason why the SGX website garners a lower percentage of total web traffic is that there are many more people who've logged on but are visiting other websites. But even this would indicate that while interest in other areas of the internet is growing, not so the SGX website.
But just as economists count employment ads and pages of advertisements in newspapers to gain a pulse-check on that country's economy, perhaps financial analysts would do well to track website visits as well as the usual round of financial information.
Mark Laudi, who is still watching the game, very closely
To comment on this blog, go to the Investor Central blog.
Labels: Alexa, SGX, Singapore Exchange
FTSE Index data: Just display it!
Stockbrokers have resisted displaying live FTSE ST Indices on their screens because of the charges that they are charged for the data. They argue they don't want to pay extra, even though they won't be charged for the first year (they secured the first-year-free concession after earlier protests). But FTSE says it costs money to compile the indices on a daily basis. Our view is that the whole debate is rather childish and the losers, once again, are retail investors.
Stockbrokers have gone through a rough ride in recent years. First the deregulation of commissions brought prices down to S$25 per online trade, S$40 per broker-assisted trade over the phone, or alternatively 0.275% or 0.28% for large trades. Previously, they got paid much more. We saw a significant round of consolidation in 1999 and 2000, which brought about, among others, the combination of Vickers Ballas and DBS to form DBS Vickers, KayHian and UOB to form UOB KayHian, and so on. For brokers who've already seen their commissions drop, any additional cost is borne by them, and not passed on to clients. They absorb extra costs because of the competition in the market, and because retail investors are generally unwilling to pay.
The irony is, the brokers are behaving just the same. Even as they complain that they have no pricing power, that retail investors generally are cheapskates who complain about "high" brokerage commissions and demand that "everything also must be free", they are asking FTSE and the SGX to do the same.
It would be much better for everyone - including retail investors - to comprehend the value of data and information. Without these, no one would be doing any trades. Data and information are not luxury add-ons. They are crucial to the whole trading process. It's like refusing to fuel up your car to spite the oil companies and high oil prices. But your car won't go anywhere!
My understanding is ShareInvestor.com has a separate data charge for its subscribers, much like airlines have a fuel surcharge separate to the price of airline tickets. Perhaps the brokers should consider this? After all, currently they look like the bad boys in this dispute. If they provided the service but passed on the cost - in a year from now, when the charges kick in - they pass the responsibility of the costs to the SGX. By then, retail investors will be so used to seeing the indices, they won't be able to do without them and this whole issue becomes mute.
Mark Laudi - who favours the FTSE ST All Share Index as the new benchmark
To comment on this blog, go to the Investor Central blog
Stockbrokers have gone through a rough ride in recent years. First the deregulation of commissions brought prices down to S$25 per online trade, S$40 per broker-assisted trade over the phone, or alternatively 0.275% or 0.28% for large trades. Previously, they got paid much more. We saw a significant round of consolidation in 1999 and 2000, which brought about, among others, the combination of Vickers Ballas and DBS to form DBS Vickers, KayHian and UOB to form UOB KayHian, and so on. For brokers who've already seen their commissions drop, any additional cost is borne by them, and not passed on to clients. They absorb extra costs because of the competition in the market, and because retail investors are generally unwilling to pay.
The irony is, the brokers are behaving just the same. Even as they complain that they have no pricing power, that retail investors generally are cheapskates who complain about "high" brokerage commissions and demand that "everything also must be free", they are asking FTSE and the SGX to do the same.
It would be much better for everyone - including retail investors - to comprehend the value of data and information. Without these, no one would be doing any trades. Data and information are not luxury add-ons. They are crucial to the whole trading process. It's like refusing to fuel up your car to spite the oil companies and high oil prices. But your car won't go anywhere!
My understanding is ShareInvestor.com has a separate data charge for its subscribers, much like airlines have a fuel surcharge separate to the price of airline tickets. Perhaps the brokers should consider this? After all, currently they look like the bad boys in this dispute. If they provided the service but passed on the cost - in a year from now, when the charges kick in - they pass the responsibility of the costs to the SGX. By then, retail investors will be so used to seeing the indices, they won't be able to do without them and this whole issue becomes mute.
Mark Laudi - who favours the FTSE ST All Share Index as the new benchmark
To comment on this blog, go to the Investor Central blog
Labels: DBS Vickers, FTSE ST, retail investors, SGX, ShareInvestor.com, Singapore Exchange, UOB KayHian
We Support The Call: Shorten Trading Hours
The Malaysian Investors' Association has finally proposed for Bursa what should also be applied to the Singapore Exchange: shorter trading hours. Its president, Datuk Dr P.H.S. Lim points to the much larger markets in Hong Kong and New York (and, I might add, Australia), whose trading hours are only around six hours in duration, instead of eight. "Shorter trading hours are good for all those engaged in the stock security industry as brokers and market researchers have more time for digesting overnight financial information of Europe and the US," he said in a statement. We concur. But persuading local investors will not be easy.
Shortening trading hours to 10am to 4pm has merit for three reasons:
1. More time to digest the news. The Singapore Exchange actively encourages companies to make their market moving announcements after the market closes, so investors have more time to decide how those announcements should affect their positions. A noble motivation. The SGX should give investors an extra hour in the morning to do so.
2. Not enough time to report the news. Datuk Dr Lim says "it is also good and more healthy for investors who could spend less time in tracking the financial markets. It is also good for the media."
Amen!
The fact is, it is a struggle for journalists to plough through all the news and write something meaningful – beyond re-writing press releases – particularly during earnings season. The quality of business reporting today should, and possibly could, improve if reporters weren't hard up against a deadline to report on ten or more financial statements.
If trade stops at 4pm instead of 5pm, and therefore companies can start reporting their significant announcements one hour earlier, that's an extra hour reporters have to do a good job with their stories.
3. The lunchbreak is so 19th Century. It's quaint, but outdated, for the market to stop just because it's lunchtime. Frankly, it might be very good for the waistlines of the broking community to scrap this nonsense of stopping for lunch. In an era of global electronic trading and demutualised exchanges it's preposterous that the whole market has to stop just because a few blokes at their trading desks want to go for makan.
But, even though I think it's a great idea, I don't think it will happen. Alas, the SGX probably thinks, if it works, why fix it. There is some merit to this thinking, because there doesn't appear to be a groundswell for change.
But I'm not suggesting the SGX goes the way of the Philippine Stock Exchange, which shortened trading hours to just three to increase the "scarcity" of the trading window and therefore the market action. I have heard the view expressed, that once the SGX opens and investors buy or sell on the news, say, in the first 90 minutes of trade, the next two hours are a bit of a waste of time. The charts don't really bear this out (above).
My fear is, though, that by keeping trading hours where they are and not moving with the times the SGX may be seen to be behind the times.
Mark Laudi
Should trading hours be shortened, and lunchtimes scrapped?
Go to the Investor Central Blog to make your comment.
Shortening trading hours to 10am to 4pm has merit for three reasons:
1. More time to digest the news. The Singapore Exchange actively encourages companies to make their market moving announcements after the market closes, so investors have more time to decide how those announcements should affect their positions. A noble motivation. The SGX should give investors an extra hour in the morning to do so.
2. Not enough time to report the news. Datuk Dr Lim says "it is also good and more healthy for investors who could spend less time in tracking the financial markets. It is also good for the media."
Amen!
The fact is, it is a struggle for journalists to plough through all the news and write something meaningful – beyond re-writing press releases – particularly during earnings season. The quality of business reporting today should, and possibly could, improve if reporters weren't hard up against a deadline to report on ten or more financial statements.
If trade stops at 4pm instead of 5pm, and therefore companies can start reporting their significant announcements one hour earlier, that's an extra hour reporters have to do a good job with their stories.
3. The lunchbreak is so 19th Century. It's quaint, but outdated, for the market to stop just because it's lunchtime. Frankly, it might be very good for the waistlines of the broking community to scrap this nonsense of stopping for lunch. In an era of global electronic trading and demutualised exchanges it's preposterous that the whole market has to stop just because a few blokes at their trading desks want to go for makan.
But, even though I think it's a great idea, I don't think it will happen. Alas, the SGX probably thinks, if it works, why fix it. There is some merit to this thinking, because there doesn't appear to be a groundswell for change.
But I'm not suggesting the SGX goes the way of the Philippine Stock Exchange, which shortened trading hours to just three to increase the "scarcity" of the trading window and therefore the market action. I have heard the view expressed, that once the SGX opens and investors buy or sell on the news, say, in the first 90 minutes of trade, the next two hours are a bit of a waste of time. The charts don't really bear this out (above).My fear is, though, that by keeping trading hours where they are and not moving with the times the SGX may be seen to be behind the times.
Mark Laudi
Should trading hours be shortened, and lunchtimes scrapped?
Go to the Investor Central Blog to make your comment.
Labels: Bursa Malaysia, Malaysia Investors' Association, P.S.H. Lim, Philippine Stock Exchange, PSE, SGX, shorter trading hours, Singapore Exchange
SGX: Expands Into Philippines - But What For?
The deal the Singapore Exchange signed to take a 20% stake in the Philippine Dealing System Holdings Corp would be interesting, if it wasn't so small, and the derivatives market in the Philippines wasn't so poorly developed. I'm all for the SGX regionalising, but one wonders what the dividends of this deal will be.
The statement by the SGX says:
The wording of the news release is also interesting: "…it has agreed in-principle to accept the offer…" In other words, PDS approached the SGX. Therefore, PDS probably has more to gain from the deal, possibly in terms of the expertise shared by SGX, etc.
The SGX clearly has to keep working to stay relevant, and deals such as this, although small, are an indication that they are doing this. Small companies can grow into bigger companies, as the SGX itself has done.
SGX CEO Hsieh Fu Hua said this morning:
But beyond the small nature of the deal, there is also the question as to who the target market is. The equities market consists of just 240 stocks worth US$93.8 bln – the smallest market in Asia except New Zealand and Colombo. There are many derivatives listed in Singapore covering equities listed in other markets. For Philippine stocks that are worth covering, wouldn't market makers in Singapore have exhausted the possibilities already? Is the domestic Philippine retail market ready for derivatives trading?
Questions which we either have to wait for the SGX – or time – to explain.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
The statement by the SGX says:
PDS operates a fixed-income exchange, depository and foreign exchange settlement platform. This proposed acquisition will provide SGX the opportunity to expand into a new geographical market and collaborate with PDS on derivatives products. SGX and PDS will also explore depository linkages to custodise securities in each other’s markets, on behalf of their account holders. The proposed collaboration will reinforce SGX’s Asian Gateway strategy and position.Perhaps, but it is difficult to see how a 20% stake worth just S$5 mln will do this. The Philippines doesn't rate a mention in the World Federation of Exchanges' most recent tabulation of fixed-income and derivatives turnover. Perhaps PDS isn't a member of the Federation.
The wording of the news release is also interesting: "…it has agreed in-principle to accept the offer…" In other words, PDS approached the SGX. Therefore, PDS probably has more to gain from the deal, possibly in terms of the expertise shared by SGX, etc.
The SGX clearly has to keep working to stay relevant, and deals such as this, although small, are an indication that they are doing this. Small companies can grow into bigger companies, as the SGX itself has done.
SGX CEO Hsieh Fu Hua said this morning:
Our proposed stake in PDS will be more than just a financial investment. It will give both parties the opportunity to collaborate on a wider suite of products in a fast-growing geographical market. SGX and PDS will also explore a depository linkage to custodise securities in each other’s markets on behalf of account holders. This proposed depository linkage fits in with the concept of post-trade alliances being a practical way of collaboration in Asia.He also said:
Einstein was said to have once defined insanity as doing the same thing over and over again but expecting different results each time. If we continue divided as we have been in the past, can we remain relevant in the years to come? This issue is especially pressing for the relatively smaller, disparate exchanges of ASEAN. To achieve a single and more significant marketplace, we propose that multilateral gateways in both trading and clearing be forged amongst the ASEAN exchanges.All these points a certainly valid.
But beyond the small nature of the deal, there is also the question as to who the target market is. The equities market consists of just 240 stocks worth US$93.8 bln – the smallest market in Asia except New Zealand and Colombo. There are many derivatives listed in Singapore covering equities listed in other markets. For Philippine stocks that are worth covering, wouldn't market makers in Singapore have exhausted the possibilities already? Is the domestic Philippine retail market ready for derivatives trading?
Questions which we either have to wait for the SGX – or time – to explain.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Labels: Philippines, Philippines Dealing And Exchange Corp, SGX, Singapore Exchange
"Trust" me
No I'm not asking you to trust me personally, I'm talking about trusts listed on the exchange. We have everything these days from ships to property, planes (soon with GE Altitude Aircraft Leasing about to list), and in my opinion in ten years just about everything imaginable will be listed. Why? Well I think the direction is already there.
Buses, Trains, Parks, Roads, you name it, soon it will have a trust and it will be available on an exchange near you to take a stake in.
Tell us what you think about trusts. Are they a good investment? Do you like them? Do you hate them? Post away below everyone and be sure to come back in ten years and tell me if I was wrong or not!
-Curtis Bergh
Buses, Trains, Parks, Roads, you name it, soon it will have a trust and it will be available on an exchange near you to take a stake in.
Tell us what you think about trusts. Are they a good investment? Do you like them? Do you hate them? Post away below everyone and be sure to come back in ten years and tell me if I was wrong or not!
-Curtis Bergh
Labels: SGX, unit trusts
Oestrogen In the Boardroom
I interviewed Banyan Tree's independent director, Mrs Elizabeth Sam recently for a story I did. While she may not be the head honcho of the group, it was thrilling to talk to a woman who have achieved so much over the years and still have time to sit down at the hairdresser's to get her hair coloured and done.
So I wonder if I'll be like her one day.
I'm sure many other girls think about it too.
But when you look through the list of board members in Singapore's listed companies, you can hardly find anybody like Mrs Elizabeth Sam.
No I don't think this is a case of sexism where gender is used as a prerequisite to get to the top of the corporate ladder.
I believe it's more a case of qualifications. See a lot of women drop off the corporate ladder to care for their families at the peak of their careers.
So women may not be as qualified as the rest ie. the men who go on to gain more experience as they work.
Obviously, there's no point putting someone in the boardroom just because she's a woman but not qualified enough to make meaningful opinions.
Or are they? The issue lies in the qualifications required to get into the boardroom. Mrs Sam has 40 over years of experience in the financial sector including being Chairman of SIMEX – what SGX was previously known as.
What if we changed the qualifications to the amount of time and effort spent on nurturing her household members? If she can care for her family, she jolly can do the same for a company
If we want more diversity of opinions in a boardroom, we want different experiences, not someone with the same set of skills with the only difference in skin or gender.
So I wonder if I'll be like her one day.
I'm sure many other girls think about it too.
But when you look through the list of board members in Singapore's listed companies, you can hardly find anybody like Mrs Elizabeth Sam.
No I don't think this is a case of sexism where gender is used as a prerequisite to get to the top of the corporate ladder.
I believe it's more a case of qualifications. See a lot of women drop off the corporate ladder to care for their families at the peak of their careers.
So women may not be as qualified as the rest ie. the men who go on to gain more experience as they work.
Obviously, there's no point putting someone in the boardroom just because she's a woman but not qualified enough to make meaningful opinions.
Or are they? The issue lies in the qualifications required to get into the boardroom. Mrs Sam has 40 over years of experience in the financial sector including being Chairman of SIMEX – what SGX was previously known as.
What if we changed the qualifications to the amount of time and effort spent on nurturing her household members? If she can care for her family, she jolly can do the same for a company
If we want more diversity of opinions in a boardroom, we want different experiences, not someone with the same set of skills with the only difference in skin or gender.
Labels: career, Elizabeth Sam, Oestrogen, sexism, SGX, women
Coming down the home stretch of the trading year
It's been quite an interesting year, and as we near the home stretch we wanted to make this blog much more interactive. After all, who wants to hear my diatribes against the market detractors and being right when I said not to panic when the market was down (again)!
The final three months of trading are well underway, and the STI hit a new record today on the first day of the month. Surprised? Well, tell us if you are.
But let's summarize what the market has been up to so far this year:
-February: Major regulatory announcements and reforms were announced in China that sent a shockwave across the trading world. Shanghai Composite dropped more than 10% leading to a worldwide selloff. Singapore was down as well.
-April Flowers Bring May Showers! Things start to look a bit better, market for the most part recovers from the February selloff. In July, the Dow sets a new all time record high at 14,000, as well as a new high on the S&P. Singapore, goes back up.
-Subprime rears its ugly head: Subprime issues emerge in the United States and spread globally as well. Market pulls back in the U.S., and in Singapore.
-October: STI rebounds at a new all time high on the 1st. Wall Street recovers after Bernanke and company cut interest rates 50 basis points.
So that's the year in a nutshell. Tell us what you think will happen for the rest of the year and where you think the STI will be at on the last day of trading for 2007.
Curtis Bergh
The final three months of trading are well underway, and the STI hit a new record today on the first day of the month. Surprised? Well, tell us if you are.
But let's summarize what the market has been up to so far this year:
-February: Major regulatory announcements and reforms were announced in China that sent a shockwave across the trading world. Shanghai Composite dropped more than 10% leading to a worldwide selloff. Singapore was down as well.
-April Flowers Bring May Showers! Things start to look a bit better, market for the most part recovers from the February selloff. In July, the Dow sets a new all time record high at 14,000, as well as a new high on the S&P. Singapore, goes back up.
-Subprime rears its ugly head: Subprime issues emerge in the United States and spread globally as well. Market pulls back in the U.S., and in Singapore.
-October: STI rebounds at a new all time high on the 1st. Wall Street recovers after Bernanke and company cut interest rates 50 basis points.
So that's the year in a nutshell. Tell us what you think will happen for the rest of the year and where you think the STI will be at on the last day of trading for 2007.
Curtis Bergh
Labels: SGX, Singapore Market, STI, Straits Times Index
SGX should set standard for corporate disclosure
The Singapore Exchange, apart from being a listed counter itself, is also one of the regulatory bodies when it comes to listings and trade.
It often emphasizes the importance for listed companies to be transparent to shareholders and to disclose any news that may affect their shares.
So it is no wonder that investors will take more notice if it gets queried by the Monetary Authority of Singapore over the sudden surge in its share price or if its shares get traded in unusually large volumes.
In other words, the SGX should practise what it preaches and set the standard for such corporate disclosures.
On 11 June, its share price spike prompted a query from the MAS, to which it replied that it “is not aware of any information not previously announced concerning the business of SGX...which, if known, might explain the price increase” and that it was not in any “negotiations or agreements which are disclosable under the Listing Rules”.
It provided a couple of reasons for the surge in its share price, citing a UBS Equities Research report which named SGX as their key sector pick and “Bloomberg and Dow Jones reports on the rise of SGX share prices amid speculation of takeovers and acquisitions.”
Attached to those are disclaimers about how it has not received notice from any party about acquiring 5% or more of its shares, or confirmed any collaborations or acquisitions of SGX shares, pretty much the same broad-based (non-committal) remarks you'd read from any other “response to MAS query”.
Four days later, it announced being informed by the Tokyo Stock Exchange that the latter has acquired about 4.99% of SGX's issued share capital.
Like, hello?
Doesn't the Listing Manual say that a company must, at any time, disclose any information that could possibly “materially affect the price or value of its securities”?
It already seems somewhat unreal that the SGX could not have anticipated this enough to have warned shareholders about any possible changes in share ownership.
After all, it has been collaborating with the TSE since last December and the TSE has, according to the Business Times, “agreed in principle to licence TOPIX-related indices to the SGX to create derivatives and electronic transfer fund products for trading on the local bourse”. They have also gone on to exploring other collaborative efforts.
So why didn't the SGX even give a hint of the possibility of such an acquisition?
It really should set the standard, being the regulator for all listed companies in Singapore.
Otherwise, it would be like the pot calling the kettle black.
Serene Lim
ArchivesIt often emphasizes the importance for listed companies to be transparent to shareholders and to disclose any news that may affect their shares.
So it is no wonder that investors will take more notice if it gets queried by the Monetary Authority of Singapore over the sudden surge in its share price or if its shares get traded in unusually large volumes.
In other words, the SGX should practise what it preaches and set the standard for such corporate disclosures.
On 11 June, its share price spike prompted a query from the MAS, to which it replied that it “is not aware of any information not previously announced concerning the business of SGX...which, if known, might explain the price increase” and that it was not in any “negotiations or agreements which are disclosable under the Listing Rules”.
It provided a couple of reasons for the surge in its share price, citing a UBS Equities Research report which named SGX as their key sector pick and “Bloomberg and Dow Jones reports on the rise of SGX share prices amid speculation of takeovers and acquisitions.”
Attached to those are disclaimers about how it has not received notice from any party about acquiring 5% or more of its shares, or confirmed any collaborations or acquisitions of SGX shares, pretty much the same broad-based (non-committal) remarks you'd read from any other “response to MAS query”.
Four days later, it announced being informed by the Tokyo Stock Exchange that the latter has acquired about 4.99% of SGX's issued share capital.
Like, hello?
Doesn't the Listing Manual say that a company must, at any time, disclose any information that could possibly “materially affect the price or value of its securities”?
It already seems somewhat unreal that the SGX could not have anticipated this enough to have warned shareholders about any possible changes in share ownership.
After all, it has been collaborating with the TSE since last December and the TSE has, according to the Business Times, “agreed in principle to licence TOPIX-related indices to the SGX to create derivatives and electronic transfer fund products for trading on the local bourse”. They have also gone on to exploring other collaborative efforts.
So why didn't the SGX even give a hint of the possibility of such an acquisition?
It really should set the standard, being the regulator for all listed companies in Singapore.
Otherwise, it would be like the pot calling the kettle black.
Serene Lim
Labels: corporate disclosure, SGX
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