- Local dailies yesterday reported that TA Securities
Holdings Bhd has become the first local stockbroker to fully migrate to an
advanced electronic platform which rides on Bursa Malaysia Bhd’s (Bursa)
Financial Information Exchange (FIX) Direct Market Access (DMA) gateway.
- This is in line with Bursa’s directive that all
stock-broking companies migrate their trading platforms to be compliant with
its DMA gateway by September 2012. DMA is often combined with algorithmic
trading to give market participants a wider option of trading strategies.
- Algorithmic trading involves the use of programmes and
computers to generate and execute orders in electronic markets. Trading
decisions, which include timing, price and order quantity, are pre-programmed.
They are mostly used by participants involved in large trades like institutional
investors and hedge funds to minimise emotional and sentiment factors.
- Although algo trading has been gaining popularity (50%-70%
of US and Europe trades, 30-40% of Asian trades), it is not without
controversy, having been blamed for contributing to volatility during the ‘2010
Flash Crash’ in the US.
- Back in April 2008, Bursa introduced DMA for the
derivatives market. This was followed by DMA for the equities market in
November 2009. DMA effectively gives both the buy-side and sell-side
participants equal control over an order execution as the buy-side traders can
interact directly with the market order book. However, stockbroking firms are
still utilising the older WinSCORE Broker Front-End System, which cannot
accommodate algo trading due to the lack of an external open interface and
speed.
- We believe that the ease of trade and reduction in latency
(DMA reduces the time for orders to be sent and matched from the previous
average of (3) seconds per transaction to a fraction of a second) is positive
for Bursa’s trading volumes in the longer term. The increased interest in high
frequency trading, a class of algo trading which involves holding instruments
for a short amount of time, should see turnover benefit, too.
- Despite the potential increase in average daily trading values
(a 10% increase will see net profits rise 7%), we are taking a cautious stance
and maintaining our forecasts for now as we factor in the uncertainties in the
global financial markets. As such, we re-iterate our BUY recommendation on
Bursa with a fair value of RM8.50/share.
Source: AmeSecurities
No comments:
Post a Comment