Post by wiley on Feb 19, 2014 19:28:50 GMT 8
SGX should seriously meet retail needs
2014-02-19 00:30:44.216 GMT
By R Sivanithy
Feb. 19 (Business Times) -- THERE have been many attempts to
stimulate retail interest in the stock market over the past few
years, but the results have not been encouraging. Brokers and the
Singapore Exchange (SGX) regularly conduct educational seminars,
the exchange's website is a useful source of instructional
information and commissions are now razor-thin, yet volume today
is poor, phones are not ringing and many brokers are seriously
contemplating throwing in the towel.
As one remisier noted, why stay in stockbroking and service
retail clients for 40 per cent of 0.2 per cent of business done,
when real estate brokers can earn 1-2 per cent? Why indeed. As we
have noted many times before, the only way to change this is to
address the concerns of the retail segment, both the punters who
trade regularly and the frontline staff who actually bring in the
business and service the retail investing public. Listening to
what they have to say may prove useful.
According to these parties, a great deal of the reluctance
to trade today originates from last October's penny stock crash.
The handling of that sorry episode was undoubtedly poor and
hardly inspired confidence, with patchy and incomplete
information from regulators compounding the fear and panic that
surrounded that collapse. This, according to unanimous feedback,
has significantly dented confidence in the system and is keeping
retail punters away.
"Clients are worried that the authorities will clamp down
very hard on speculative punting and shift the goal posts after
the game has started," said one trading representative (TR),
summing up existing fears.
One of the measures proposed post-October is to curb contra
trading by shortening the settlement period and to require 5 per
cent collateral for all trades. Setting aside the question of
whether contra trading really played a significant role in the
rise and fall of the penny sector, this proposal would
undoubtedly be unpopular among older TRs, retail players and
those with clients who rely heavily on contra. However, there is
no denying that if implemented, this move would reduce the credit
risk which TRs and ultimately their brokerages have to bear, so
on balance, it should be seen as a step in the right direction
and thus should be accepted in that spirit.
However, to allow some latitude for contra trading without
collateral and thus cater to die-hard punters, a suggestion has
been made that the 5 per cent requirement should apply only for
trades above a certain size, perhaps $50,000. This is worth
considering, but it's possible to take it a step further and
instead have a progressive scale where the larger the sum traded,
the higher the collateral.
So perhaps for trades under $50,000 no margin need be
deposited; for trades say from $50,000-$250,000 the client would
have to put up 5 per cent, and for trades above $250,000, 10 per
cent collateral would be required. Having such a graduated scale
should afford even greater protection for TRs while allowing some
scope for speculative punting.
It would offer another advantage - freed from the burden of
having to worry about credit risk, TRs would have more scope to
service their clients, something which according to anecdotal
evidence is badly lacking in today's market. The better the
service retail investors receive, the more likely they would be
to trade, but it shouldn't stop there - as a complementary move,
it's worth considering reinstating the lunch break that was taken
away in August 2011.
Although we do not have official numbers, the vast majority
of brokers contend that liquidity has not improved after SGX's
switch to continuous all-day trading, which spans the eight hours
from 9am to 5pm.
Even if there has been an improvement, is it really all
about money? Is there no room at all for the exchange to
demonstrate some sympathy for the needs of a community whose job,
it has to be said, has grown increasingly restrictive and
unattractive?
Granted, some TRs now work in teams and take turns to go for
lunch, while others rely on mobile platforms using smart devices
like iPads, so some have adapted. But this does not apply to all
TRs, many of whom previously used the break to meet clients and
talk to them about their needs but have since abandoned the
practice. Is it any wonder therefore that service standards today
are where they are - virtually non-existent?
SGX should seriously explore possible compromises, perhaps
closing for lunch when Hong Kong breaks between 12pm and 1pm and
extending the trading hours, maybe to 5.30pm. If it did this, it
would lose only 30 minutes' worth of business but gain an
incalculable amount of goodwill.
The same goes for our oft-repeated suggestion to address the
split in commissions between TRs and their houses. The industry
norm is 60-40 in favour of the house; the exchange should
encourage a shift towards a more equitable split, such as 60-40
in favour of TRs. After all, TRs are really SGX's frontline sales
proxies, selling the exchange and its offerings to the retail
public. Engaging them has to be the way forward.
Copyright 2014 Singapore Press Holdings
-0- Feb/19/2014 00:30 GMT
2014-02-19 00:30:44.216 GMT
By R Sivanithy
Feb. 19 (Business Times) -- THERE have been many attempts to
stimulate retail interest in the stock market over the past few
years, but the results have not been encouraging. Brokers and the
Singapore Exchange (SGX) regularly conduct educational seminars,
the exchange's website is a useful source of instructional
information and commissions are now razor-thin, yet volume today
is poor, phones are not ringing and many brokers are seriously
contemplating throwing in the towel.
As one remisier noted, why stay in stockbroking and service
retail clients for 40 per cent of 0.2 per cent of business done,
when real estate brokers can earn 1-2 per cent? Why indeed. As we
have noted many times before, the only way to change this is to
address the concerns of the retail segment, both the punters who
trade regularly and the frontline staff who actually bring in the
business and service the retail investing public. Listening to
what they have to say may prove useful.
According to these parties, a great deal of the reluctance
to trade today originates from last October's penny stock crash.
The handling of that sorry episode was undoubtedly poor and
hardly inspired confidence, with patchy and incomplete
information from regulators compounding the fear and panic that
surrounded that collapse. This, according to unanimous feedback,
has significantly dented confidence in the system and is keeping
retail punters away.
"Clients are worried that the authorities will clamp down
very hard on speculative punting and shift the goal posts after
the game has started," said one trading representative (TR),
summing up existing fears.
One of the measures proposed post-October is to curb contra
trading by shortening the settlement period and to require 5 per
cent collateral for all trades. Setting aside the question of
whether contra trading really played a significant role in the
rise and fall of the penny sector, this proposal would
undoubtedly be unpopular among older TRs, retail players and
those with clients who rely heavily on contra. However, there is
no denying that if implemented, this move would reduce the credit
risk which TRs and ultimately their brokerages have to bear, so
on balance, it should be seen as a step in the right direction
and thus should be accepted in that spirit.
However, to allow some latitude for contra trading without
collateral and thus cater to die-hard punters, a suggestion has
been made that the 5 per cent requirement should apply only for
trades above a certain size, perhaps $50,000. This is worth
considering, but it's possible to take it a step further and
instead have a progressive scale where the larger the sum traded,
the higher the collateral.
So perhaps for trades under $50,000 no margin need be
deposited; for trades say from $50,000-$250,000 the client would
have to put up 5 per cent, and for trades above $250,000, 10 per
cent collateral would be required. Having such a graduated scale
should afford even greater protection for TRs while allowing some
scope for speculative punting.
It would offer another advantage - freed from the burden of
having to worry about credit risk, TRs would have more scope to
service their clients, something which according to anecdotal
evidence is badly lacking in today's market. The better the
service retail investors receive, the more likely they would be
to trade, but it shouldn't stop there - as a complementary move,
it's worth considering reinstating the lunch break that was taken
away in August 2011.
Although we do not have official numbers, the vast majority
of brokers contend that liquidity has not improved after SGX's
switch to continuous all-day trading, which spans the eight hours
from 9am to 5pm.
Even if there has been an improvement, is it really all
about money? Is there no room at all for the exchange to
demonstrate some sympathy for the needs of a community whose job,
it has to be said, has grown increasingly restrictive and
unattractive?
Granted, some TRs now work in teams and take turns to go for
lunch, while others rely on mobile platforms using smart devices
like iPads, so some have adapted. But this does not apply to all
TRs, many of whom previously used the break to meet clients and
talk to them about their needs but have since abandoned the
practice. Is it any wonder therefore that service standards today
are where they are - virtually non-existent?
SGX should seriously explore possible compromises, perhaps
closing for lunch when Hong Kong breaks between 12pm and 1pm and
extending the trading hours, maybe to 5.30pm. If it did this, it
would lose only 30 minutes' worth of business but gain an
incalculable amount of goodwill.
The same goes for our oft-repeated suggestion to address the
split in commissions between TRs and their houses. The industry
norm is 60-40 in favour of the house; the exchange should
encourage a shift towards a more equitable split, such as 60-40
in favour of TRs. After all, TRs are really SGX's frontline sales
proxies, selling the exchange and its offerings to the retail
public. Engaging them has to be the way forward.
Copyright 2014 Singapore Press Holdings
-0- Feb/19/2014 00:30 GMT