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6/29/2012

Demise of the stockbroking industry is imminent



With the trading volume petering off other than non commission generating computer trades, broking houses are finding it tough going to cover their overheads. Remisiers too are sleeping on their jobs literary with hardly a phone call daily. Many would have qualified as low wage earners going forward and should be entitled to workfare subsidies.

Someone would have to bear the operating costs of brokerages and pressure has been put on remisiers to push their clients to trade more or they would have to cough up the difference in operating cost. Some houses are dangling the carrot to induce sleeping clients to start trading.

All these are meant well measures but failing to understand the real cause of the dying market and are futile efforts, grasping at shadows. Not many investors have much money left to feed the big funds and their gambling computers. When entering the market is a certain loss, who would want to trade even if it is for free? Unless the real cause of the systemic flaws in the market are recognized and removed, the stock market will collapse in increasing speed.

Within a matter of months there could be an exodus of remisiers out of the industry. More would be applying for taxi driving licence as the last resort. Employees of brokerages are bracing up for the red letters as retrenchment is on the card when revenue fails to match operating cost.

How could a healthy and lucrative industry reach such a pathetic plight? Actually the writings were on the wall several years back when all the changes were introduced into the market. Anyone in the industry would know what is happening but no one would want to do anything, and the slide to the bottom and self destruct is only a matter of time.

20 comments:

Anonymous said...

RB
You are absolutely right in your warnings.

Our policy makers have forgotten the original purpose of having a stock exchange in Singapore in the very first place?

"A man's reach should not exceed his grasp"

But cannot say this when you are paid a million dollar salary?

Park said...

A stock exchange purpose is to facilitate exchange of stocks. Whats stoping you from buying and selling now?

The advent of computers and internet have heralded electronic trading long ago. The writings have been on the wall and it is happening everywhere. Stockbrokers are bypassed. Times are changing; service sector used to be a very small sector, now it is huge and becoming bigger. Get out from sunset industry and get into sunrise industry.

Anonymous said...

want to play with my computer dice that always compute to make sure I win and you lose?

patriot said...

No one should lose any sleep for the demise of any paper trade.
Barter trade would have keep everyone working hard and have fairer exchanges.

patriot

Chua Chin Leng aka redbean said...

Hi Park, welcome to the blog.

A stock exchange has a basic ruling, to provide a level playing field for all to trade. When there is no level playing field, when computers are allowed to tap onto the system to monitor all the trades and place bets to win, this is not a stock exchange anymore. It is a casino.

Anonymous said...

That is where you are wrong. Before the advent of internet trading, orders from retailers are routed to runners who run to the pit and shouted out in the pit, and small time investors got to jostle with biggies who definitely have a "bigger" voice and their big orders inadvertently get filled first before the small fries. Now with the abolishment of pit trading, ALL orders, big or small are routed to a centralised compuetr who matches orders based on time. I m sure, now, even if retailer calls the stockbroker to buy or sell, the stockbroker will also key into the computer system who then match the best price/order based on first come /best price match. The computer therefore matches orders unemotionally, reagardless of order size and investor pedigree, so how can this be a "unlevel playing field" ? If anything, the small retailer is on the same playing field as the institutional investor, which previously, is not.

As to "computers are allowed to tap onto the system to monitor trades", whatever information available from SGX is public information, what is available to institutions is available to the retalier as well, as long as one is willing to pay a subscription to SGX to get such real time infomation. So even if one is willing to pay for such information, its usefulness is much in doubt, as investors sometimes key in phantom orders to generate phantom demand which they pull out when prices gets near. So such info cannot be relied upon. So computers and internet have very much levelled the playing field. There are no lack of successful smalll time retailers, and there are no lack of institutions who have lost it big.

If one treat the stock exchange as a casino, trading in and out, then it will be a casino.

Anonymous said...

Always thought the purpose of a stock exchange was to provide a platform for a private company to raise funds from the public.
Hence becoming a publicly listed company.

Chua Chin Leng aka redbean said...

From outcry to a computerised system, it was a great improvement. But the Americans went one step further. It is heaven and hell for traders or funds to use their computers and programmes, methodologies etc to work out their buy/sell strategies.

It is outrageous if they hooked up their computers to read how many buys/sells at what price and churn the computers to compute what is the best price to buy and sell to make a profit. And this is not available to most traders. It is speed and ability to compute millions of data at a split second.

Anyone what cannot see anything wrong with this, then it is like the CHC believers saying that Kong Hee has done no wrong in misappropriating the $50m he is accused of.

Park said...

CHC is fraud, a criminal offence, is illegal.

Chua Chin Leng aka redbean said...

When you gamble in a casino, say throwing dice, it is a fair and equitable game because both parties know the odds.

It is a different thing when the dice is loaded.

Another example is poker. A fair game of chance. It becomes unfair when one party is able to see the cards of the other party to take advantage of it.

And this is what computers being plug into the exchange is doing.

Anonymous said...

And the govt allows this to happen? What is MAS doing?

Anonymous said...

MAS and its' staff making big money for Sin and themselves lor.

Anonymous said...

Death of the local stock broking industry is as sure as the sun rises.Dwindling local population,both speculators and investors, because of the STOP AT TWO policy,is perhaps the first apparent sign of the failure and collapse of the country.
Rely on the FTs,forget it.They find better use of their hard earned money back home.Rely on younger generation to keep the industry going,forget it as they have hardly enough to feed themselves.

Anonymous said...

Does anyone care?

Anonymous said...

Front running the orders by so called High Frequency Computer Trading algos is what's killing retailers. Google it , its widely known.

Bill Lohrenz said...

Does anyone care?

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