Below is my letter to MAS in response to their open call for feedback from stakeholders in the stock broking industry.
PM Lee Hsien Loong
DPM/Finance Minister Tharman Shanmugaratnam
The MD MAS R Menon
CEO SGX Magnus Bocker
5 Mar 14
The Stock Market is NOT fine. It is no longer a level playing field and
has been redesigned for unfair trading in favour of computer trading.
(This two line statement is a summary of this paper)
This is an open letter to the above gentlemen and will also be posted in my blog, www.mysingaporenews.blogspot.sg/.
The Stock Market is not fine contrary to what was stated in the
discussion paper issued jointly by the MAS and SGX. The condition of the
stock market is dire, in a state of denial and slipping into a coma.
Yes, the trading volume gives an impression that it is healthy and
active. The revenue and profit of the SGX suggested that all is fine and
presumably the market will continue to function in this manner for a
long time to come, with the SGX chalking up good revenue and profit as
it gets along. It is NOT. There are hardly any retail traders in the
market. Why?
The Stock Market is not only the SGX. It has other players and
stakeholders. And all is not fine except for the SGX and the computer
traders. Some of the front line soldiers, the remisiers, are earning
less than what a cleaner or security guard is getting. Younger remisiers
have already left the industry or seeking employment. Only those that
could not find alternative employment are sticking it out and waiting
for the broking houses to ask them to leave.
The retail traders have fled from the market.
With this pathetic level of commission, the broking houses too would not
be able to sustain their operations at the current scale and would soon
have to downsize and retrench staff. The supporting staff will have to
go and overhead cuts. Some may want to get out of the business too.
For companies listing in the SGX, soon they will realise that it is a
waste of time when the value of their shares are near to worthless. It
is a joke that the prices of stocks in the main board of a regional
financial centre with big ambition can be less than 5 cents or even
worse, less than 1 cent. And this is not an exception.
What is happening to the Stock Market? What are the causes that led to
this dismal state of affair? Some stakeholders will still swear that it
is fine. They will not want to see the elephant in the class room. What
is that?
The culprit that is causing the demise of the Stock Market is not contra
trading as they would want you to believe. Excessive contra trading and
speculations need to be moderated but not to be wiped out. They are the
soul and spirit of a small market. Without contra trading and
speculations you will have a market the size of a pea.
The Stock Market today is not the traditional stock market that we knew
before. All the principles and fundamentals of a traditional stock
market have been violated and cast away. The Stock Market we have today
is nothing but a casino in disguise but without the strict regime,
regulations and controls of a casino.
The SGX has been reorganised and redesigned to allow computer traders
using high speed sophisticated computer systems to trade against
unsophisticated investors or even big funds still trading on
fundamentals and believing that they are investing in the long term.
Rules and processes have been changed to facilitate computer trading to
be more effective and efficient, taking full advantage of computer
power, time and speed, and financial resources to cream the market, to
trade against investors without the benefits of these computers.
Continuous trading with no lunch breaks, small board lot size, minimum
bid size, script borrowing, keying in of short positions, etc etc were
all created to favour computer trading against other traders.
High speed computers of computer traders are plugged into the SGX system
to have access to information of other traders and their positions and
simply trading against them with no regards to the fundamentals of the
stocks. Computers trade for profit by buying and selling against the
rest of the investors, often depressing prices of stocks against their
real values. They have cleaned up the traders, big and small, and not
many are left with money to lose.
Put it simply, computer trading is unfair trading, unfair advantage. It
violates all the fundamentals, principles and regulations of the SGX to
provide a level playing field and fair trading to all the players. How
could this be allowed by the SGX? This is criminal.
I am not making any suggestion or recommendation as to how to save the
Stock Market. The solutions are obvious but no one wants to see or do
the right thing. The invitation for the public, the uncles and aunties
for their recommendations to improve market activities, but creating an
unfair and uneven playing field, reflects two things. One, they do not
see anything wrong with the current system. Two, they are not serious.
The problems in the industry and the Stock Market are very serious and
highly technical. You need experts and professionals who can understand
what is happening and the complexities of the market mechanism to know
what is wrong and what are needed to put things right.
If you get the picture, and see the problem and want to do something
about it, it is best to set up a COI of experts who not only know what
they are doing but have the heft and confidence to change what really
need to be changed. You would need people like Paul Volcker or some real
foreign talents who are critics of the existing flawed stock market
system to tell the truth about the unfairness of the system. The
advocates of the system will not volunteer to tell you what is wrong
with the market and the system. They will say it is fine. This is how
far I am prepared to comment.
For a ‘nobody’ to make suggestions is not only rude but a waste of time
when the believers and converts of the current system could simply throw
the paper into the waste bin. You need a COI of professionals to make
real changes, failing which you can wait to bury the Stock Market in a
year to two.
If you have bothered to read this far, there is some hope that the stock
market industry can be saved. And I thank you for your patience and
trouble to hear me out.
Thank you.
Kopi level - Green
redbean
ReplyDeleteThe premise of your letter and arguments is all wrong.
You keep talking about "level playing field"
- as if "they" care
You must appeal to their self interest
- you must show that if your recommendations are accepted ... then how that will lead to higher pay for the MAS officials
- and since MAS officials have a higher pay ... then Ministers must also have a higher pay since the work of Ministers is more important to the nation.
You ask poor people to do "national service". This is acceptable.
But when you talk to higher ups ... you must talk about how to increase their salaries under the guise of "the greater good"
“Remember your place in society before you engage in political debate…
Debate cannot generate into a free-for-all, where no distinction is made between the senior and junior party…
You must make distinctions -
What is high, what is low, what is above, what is below,
and then within this, we can have a debate, we can have a discussion…
people should not take on those in authority as ‘equals”
GEORGE YEO
RB, I share the same sentiments for some time now about what's going on and your words underscore my exact thoughts. Unfortunately, I doubt very much G/regulators or the exchange will do the right thing. And the right thing is pretty obvious. It is very frustrating and hot under the collar to see screwed policies hurting ordinary citizens but those in charge dont seem keen to set it right. One wonders why.
ReplyDeleteAgree with you. There are two points I am making. The situation at this point is to save the stockbroking industry. So not the right time to talk about increasing their salary. In fact saving the stock market will save a lot of people of their million dollar salaries. Or they will be retrenched, sacked or get a pay cut. Not forgetting the investors can take a class suit against the SGX.
ReplyDeleteThe second part on how to increase their salary will come if they are willing to pay me a consultancy fee: )
Aiyo, no need RB to write letter to tell them lah, as if they don't already know the points RB raised.
ReplyDeleteFor one, they are not daft, u know.
But they still call for open feedback as a matter of good practice and PR lah.
Just as you have now and before written about the failings of SGX I have also commented before that the American government and its big business institutions like the banks, stock markets, real estates, insurance and conglomerates have always been run by sophisticated crooks, rogues, scoundrels and charlatans. These Americans crooks and scoundrels have been spreading like cancer all over the world and causing great damage and suffering to the people and economies of every country they descended upon. The American crooks and scoundrels have been in town for quite many years and they have been embraced by the authorities as foreign talents not knowing or ignoring that they are destroying the life line of Singapore's economy and survival. Well, can any thing be done when Singapore, I mean the authorities are aping the American crooks' system in total.
ReplyDeleteSouthernglory1
Thursday,6th March,2014.
RB did the right thing by addressing to the PM and DPM. So no one can cover up and the the PM and DPM cannot say they did not know.
ReplyDeleteThis fiasco is hundreds of times worst than the Lehman bonds and toxic notes. The Blumont thing is peanuts. It is the whole market that is going down and the billions that have been robbed from the innocent investors by the computer traders.
RB is wasting his time. Nobody cares. The remisiers are not bothered. The broking houses are not bothered. The investors and funds that are losing their pants are not bothered. The listed companies are not bothered.
ReplyDeleteYou think the govt bothers?
Agree with Anon 945.
DeleteRb damn naive to think that SGX is set up for the small fishes(retail investors) to feed on. Shall we say in nature, big fish actually and naturally eat small fishes to be fed and grow. No difference for any commercial entities. SGX like any commercial houses is only interested in bottomline. If higher volume (transactions) generated by computerised tradings means more incomes, what are remisier and other middlemen? Go and be taxi driver, security guard or cleaner, who cares!
The Letter to them will be ignored.
Yes, but how will helping the stockbroking industry benefit the Minister?
ReplyDeleteredbean must be constructive in his criticism.
Must show how helping the stockbroking industry can help support another pay increase for the Minister.
Otherwise it's just talk cock sing song.
You wanna save the stock exchange or the remisiers?
ReplyDeleteYour feedback sounds to me like a pitch for the unsuccessful remisiers rather than faulting the SGX.
That job should go to the Society of Remisiers, no?
There is a big wayang going on and no one wants to say or see the big white elephant in the classroom. Everyone pretends everything is ok and just go scratching at the mosquito bite.
ReplyDeleteIf MAS is still not going to do something, it shall be ultimately responsible when the stock market collapses.
Bring back Koh Beng Seng. He is the man that can save the SGX.
Southernglory, they have bern modelling after the u.s. buying their useless toys and following, there should not be a surprise in you, just as long as their pay gets fatter, do they really care.
ReplyDeleteThe Remisiers are to be a bunch of relics, stuff into one corner, RB, if you ever get a reply for your forsaken message which is most likely place in the, "when i have time, i'll read section", do let us know.
Maenwhile, kopi's to you, thicken with curry sauce.
Pinky poo
Aiyo, of course save the remisiers lah. RB is also a remisier, read his blog u don't know meh?
ReplyDeleteBut as a matter of good PR, how can RB put it that way, tio bo?
In fact, based on the letter, I would say RB will also make a good politician. But being a smart Sinkie, of course cannot be an opposition one lah. And to be PAP one, u need to get invitation card, so not so easy lah, even if you want to. Hahahahaha.
Thanks Pinky Poo for the kopi. Level still a bit low.
ReplyDeleteFor too long, Sinkies have lost the way and thinking that their future is in good hands. They have forgotten that when their interests are violated, they must stand up to fight for it. No one is going to fight for them. The politicians, like you guys are saying, are more concern with their million dollar bank accounts.
Would anything come out from this letter of mine? Maybe I will ask another question. Who is going to answer when something worse than the Lehman bond case pops up? Can those people responsible claim ignorance again, 'I dunno leh, not my problem'. Then quickly set up another COI to investigate?
The mess in the SGX is now made known to them and let's see how they handle it. Nevermind, I expect my letter to be in the waste bin. Quite normal. This is not the first letter that I wrote. They didn't even have the courtesy to acknowledge my past letters. Still waiting to see if they acknowledge receiving this letter.
RB should join the opposition.
ReplyDelete/// They didn't even have the courtesy to acknowledge my past letters. Still waiting to see if they acknowledge receiving this letter. ///
ReplyDeleteredbean
Who will want to acknowledge receiving your letter?
Acknowledge means they have to give you a name.
Once you have a name, they you can anyhow suka, suka go and follow-up with this name.
Like that how can?
SGX problems likely started when Koh Beng Seng fell out of favour.
And LHL's "disclosure based regime' became the flavour of the month at SGX.
Here is the link which tells you when the "strategic U-Turn at SGX started. See page 4 under Financial Supervision:
http://www.bis.org/review/r010720a.pdf
Here is the alleged "smoking gun" paragraph:
"MAS has also, since 1998, been reviewing and updating its approach to regulating and supervising the financial sector. First, we have instituted a fundamental shift in emphasis away from “one-size-fits-all” regulation of institutions to risk-focused supervision, and from merit-based regulation
of products to a disclosure-based regime."
So "structured products" investors ... please pay attention.
The government is employing a "risk focused regulation regime".
NOT a "merit-based regulation of products".
And if you still don't fucking understand the significance of what you are reading ... you really deserve to lose all your money.
Big fish eats small fish, small fish eats planktons. If there is no plankton, all the fish, big or small will disappear as well.
ReplyDeleteWho is the naive one? You know what is logical thinking? TSorry too deep for you. Take it that I have not said it.
Remisiers, middlemen who couldn't earn a living and loser Sinkies were already part of the 40% who did not vote PAP in 2011. And their situation then was very bad, maybe even worse than now.
ReplyDeleteBy making lots of winner foreigners into new citizens since 2011, I believe the 40% can even be reduced by next GE.
"Big fish eats small fish, small fish eats planktons. If there is no plankton, all the fish, big or small will disappear as well."
ReplyDeleteAnon 1:47 pm
U talking about plankton in the small Sinkie sea? Ya, then I think not much left.
But not in the ocean outside. Just open up the Sinkie sea to the ocean lah. Then you can get all the plankton you want. All kinds too.
I agree with you. The remisiers will fall into the opposition camp at the way things are moving. Many may become taxi drivers and security guards.
ReplyDeleteAnon 1:58, not all remisiers are down and out. Some are still having incomes that would put what you earned to shame and a waste of time for the hours you put in.
ReplyDelete@ Anon 147
ReplyDeleteBetween Socrates and Thracymacus, me thinks both were as good in that neither claimed to have more depth in intellect. They lacked conceit which make them great.
Taking part in international trade fairs could help, if want to take your business to the foreign markets.
ReplyDeleteLooks like RB is the only one talking about this. The rest of the remisiers and stakeholders do not bother or are very happy with the situation.
ReplyDeleteRB should not waste his time on this.