I REFER to the report “Bursa sets record straight on remisiers issues” (The Star, Dec 11). The concerns raised by the Remisiers’ Association of Malaysia or Pesama has its basis.
Liberalisation of brokerage fees is fine if it reduces trading cost for all investors. However, what many investors are not aware of is that there exist certain type of privileged market players who do not pay any fees. They are called Proprietary Day Traders (PDTs) and Investment Accounts (IVTs).
Basically, these are personal or the house account of the dealer or broker and their full-time job is to trade or speculate as much as possible.They are not serious or long-term investors as they will usually square their positions on the same day.
While most investors must pay brokerage fee, clearing fee and stamp duty whenever they trade, these PDTs and IVTs do not incur such costs. This zero cost privilege has enabled them to profit from even a minimal of one uptick or half a sen when normal investors have to wait patiently for at least nine upticks before they can even break even (based on the minimal brokerage of RM40 for both the buy and sell side).
Since they pay no fees and therefore bring no income to the regulators, why are they treated better than others?
Effectively, they are granted a free hand to trade, speculate or gamble in the market on a different set of rules of which the odds are better off than the genuine and serious investors.This has made a mockery of the fair and orderly market motto that the regulators often trumpet.
It has been argued that the privilege is given as an inducement for them to trade and thereby create an impression of active and vibrant market condition. The intention is well and good. However, the reality is that it has created extreme disorderliness and volatility to price and volume movement arising from their aggressive speculative nature and coming from a nothing-to-lose mentality due to the zero cost benefit.
Their no value added activities have caused more headaches than positives for the regulators.
Many unusual trading activities were not due to any material development in the company but were due to excessive speculation by these PDTs and IVTs.In addition, regulators have set little limits over their trading activities. It has often been said that the regulators have created an animal they can’t control.
It is like letting loose a high horsepower car on the highway without imposing any speed limit thereby endangering other users.
Many genuine and serious investors have been influenced/lured to trade by the price and volume trend, thinking something materially positive may be developing in the company; only to discover later that it was just speculation caused by these parties hoping to profit from price volatility.
The regulators need to get their act together and treat all investors equally especially when it comes to investing as the money used to invest may be hard earned.
Investors must also be informed and aware that rules of the game may not be the same for everyone and not be overly excited by rise in price and volume as this may just be hot air created out of nothing.
STRICTLY FAIR AND ORDERLY
Kajang
This reader comment was published in TheStar on 13Dec13.
So who is protecting the small fish?
