George Lim – SGX/SIAS wrong…
A letter by George Lim the the ST forum warned that it was wrong for SGX and SIAS to encourage the heartlanders to play the stock market. He reckoned that the heartlanders cannot afford to lose compare to the rich. And good shares are beyond them as there are too expensive. And with the rich and well informed also losing in the market, what chance do the heartlanders have to get a decent return in the market?
The first concern is easier to deal with. Just encourage the heartlanders to trade in derivatives. These are cheap and low cost trading instruments for the cheap heartlanders with not much to lose. And all it needs is to educate them on these instruments, hold more talks to equip them to trade effectively and successfully against the proprietary traders and fund managers.
Another area to educate the heartlanders is high speed computer and algo trading. SGX and SIAS may want to make it known to the heartlanders how these two mechanisms work and how they advantage or disadvantage the heartlanders. This is an important disclosure to the innocent heartlanders. They must know who and what their competitors are doing and whether they have a fair chance against the big funds and their trading machines. They must tell the heartlanders that SGX is providing a fair and level playing field for them to trade and their investments are safe in such a safe and fair system.
If I can remember, no one has ever come out to explain how high speed computers and algo trading can affect the small traders. Whose responsibility is it to keep the small investors educated and informed to protect their interests? Or the high speed computers and algo trading are just neutral and innocent mechanism that the small investors have nothing to worry about? In that case, there is no need to keep anyone informed. But if they could be as dangerous as toxic notes and minibonds, then the public and small investors must be duly informed and educated, and caveat emptor will then be more meaningful. Failing to keep the small investors informed of the dangers of these trading mechanisms and to fall back on caveat emptor is unjustifiable and unacceptable.
Have SGX, SIAS and MAS done enough to educate the small investors, particularly the heartlanders before they put their money into the system?