Responsibilities of Stock Exchanges
Goh Eng Yeow wrote an article in the ST on 6 Dec expressing concern on the role of high speed trading and the interests of small traders. High speed trading as an instrument used by big funds to take advantage of sophisticated computer technology is giving the funds an unfair advantage against the small traders. With the aid of high speed computers, the fund is able to tap into the system to know the queues of buy and sell and more, and could then come to a quick decision to buy and sell to its favour. When funds are trading in a big way, high volume and high speed, against the small investors or the rest of the investors, the losers are obvious. What then is the position of the stock exchanges on this new development? There are some fundamental responsibilities and roles which the stock exchanges are governed by its own regulations to uphold and to protect investors. Among these are: 1. Provide a level playing field. With the participation of high speed trading, is the playing field level? Is there an unfair advantage in favour of high speed traders? 2. Churning is against the regulations of stock exchanges. 3. Buying and selling without change of ownership is a violation of stock exchange regulations. 4. Buying and selling and creating a false market through such actions is also a violation of stock exchange regulations. 5. Is the trading of big funds transparent to the small investors when transparency is a hallmark of a proper stock exchange? How could stock exchanges protect the interests of investors and maintain the integrity of the system without compromising on its own regulatory role with the introduction of high speed trading? Is there a problem here?