KUALA LUMPUR STOCK EXCHANGE KUALA LUMPUR STOCK EXCHANGE Trading On The Secondary Market Trading On The Secondary Market
HISTORY
1930 Singapore Stockbrokers’ Association – the formal organisation in the securities business in Malaysia.
1960 Malayan Stock Exchange formed and public trading of shares began on 9 May. (In 1961, the Board System was introduced with two (2) trading rooms, in Singapore and Kuala Lumpur, that were linked by direct telephone lines into a single market with the same stocks and share listed at a single set of prices on both boards).
1964 Stock Exchange of Malaysia formed
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HISTORY
1965 With the secession of Singapore from Malaysia, the common stock exchange continued to function but as the Stock Exchange of Malaysia and Singapore (SEMS).
1973 With the termination of currency interchangeability between Malaysia and Singapore, the SEMS was separated into The Kuala Lumpur Stock Exchange Bhd (KLSEB) and The Stock Exchange of Singapore (SES).
Malaysia companies continued to be listed on SES and vice-versa.
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HISTORY
1973 A new company limited by guarantee, The Kuala Lumpur Stock Exchange (KLSE) took over operations of KLSEB as the stock exchange. In 1994, renamed Kuala Lumpur Stock Exchange.
1984 Computerisation of the clearing system with the formation of a central clearing house, Securities Clearing Automated Network Services Sdn Bhd (SCANS).
1986 KLSE Composite Index, regarded as the main market barometer, was launched
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HISTORY
1987 Real-time information dissemination via MASA (acronym for Maklumat Saham which means
“share information”) was introduced. Enhanced MASA II was introduced in 1990. In 1994, WinStock which is a more integrated information system, replaced MASA II.
1988 Second Board of the KLSE launched to enable smaller companies which are viable and have strong growth potential to be listed.
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HISTORY
1989 Implementation of SCORE (System On Computerised Order Routing and Execution), initially as a semi-automated trading system.
SCORE did away with the outcry system and hence, the trading floor at the Exchange’s premises. While order-entry was automated, matching remained manual. In October 1992, fully automated trading, i.e. both order entry and matching, was introduced and the process was completed in November 1992
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HISTORY
1990 Delisting of Singapore incorporated companies from KLSE, and vice-versa, as of 1 January.
1990 Malaysian Central Depository Sdn Bhd was set up to implement and operate the Central Depository System (CDS).
1990 The Fixed Delivery and Settlement System (FDSS) was introduced to bring about a more efficient clearing and settlement system.
1991 Exchange Main Board All Share (EMAS) Index launched.
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HISTORY
1992 Launching of CDS account opening in November. Immobilisation of the first CDS counter in March 1993. Introduction of CDS marks a major milestone for KLSE and will result in a more efficient settlement and clearing system.
By the end 1993, all Second Board counters were in the CDS. Beginning 1994, the process of bringing Main Board issues, both existing and new, into CDS began. The CDS was fully implemented by the end of 1996
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HISTORY
1993 The establishment of the Securities Commission in March.
1994 Implementation of Broker End System, or WinSCORE, whereby each dealer has a single integrated workstation which incorporates order-entry as well as real-time price information and other market information. The system enables real-time, on-line monitoring of the dealers’ and broking companies’ risk exposure.
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HISTORY
1995 Introduction of trading in smaller board lots of 200 units aimed at increasing the accessibility of higher price securities to a larger number of investors.
1995 Guidelines on Electronic Client Ordering Systems for stockbroking companies were issued.
1995 On 15 December, Kuala Lumpur Options and Financial Future Exchange (KLOFFE) began its operations. An electronic-based private Exchange, KLOFFE trades on stock index futures based on KLSE Composite Index.
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HISTORY
1997 In line with other developed stock exchanges, KLSE implemented the T + 5 Rolling Settlement System on 18 August. This system applies to all instruments listed on the Exchange.
1999 On 15 July 1999, KLSE launched the Institutional Settlement Service, which is a service offered by SCANS, to achieve Delivery Versus Payment (DVP) for institutional investors in securities settlement.
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HISTORY
2000 On 20 December 2000, KLSE has shortened the settlement period from T+5 to T+3 to increase efficiency and to reduce settlement risk in order to enhance competitiveness.
2001 All Provisional Allotment Letters (PALs) have been prescribed under the CDS from January 2001.
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TYPES OF MARKET
Primary Market
A primary market (new issue market) is a part of the capital market for new long term capital or initial sale of securities from issuing companies or governmental bodies to investors, either publicly or privately.
Secondary Market
The secondary market is where existing securities are bought and sold. It allows investors to sell their shareholdings readily and therefore assures investors a degree of liquidity. The existence of the secondary market therefore makes the primary market operate more effectively.
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TYPE OF TRADING SYSTEM
Order-Driven
In an order-driven system, such as used on KLSE, the prices are determined by the market forces. Buyers and sellers quote the bid and ask prices and prices are matched, in the case of KLSE, by its automated trading system. Apart from KLSE, the SES and Hong Kong Stock Exchange also use the order-driven system.
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KLSE INDICES
Composite EMAS Industrial Consumer Products Industrial Products Construction Trading/Services Finance Mining Plantation Property Second Board
Syariah (implemented 17/4/1999) Technology (implemented 15/5/2000 )
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KLSE MAIN BOARD
SECTORS Consumer Products Industrial Products Construction Trading/Services Technology IPC Finance Hotels Plantation Property Mining Trust
Loans/Warrant/Rights Closed-End Fund
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KLSE SECOND BOARD
SECTORS Consumer Products Industrial Products Construction Trading/Services Technology Properties Plantation
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TYPES OF SECURITIES TRADED ON KLSE
Ordinary stocks/shares
Give holders the rights of ownership of the company such as the right to share in the profits of the company by way of dividend, the right to vote in general meeting and to elect and to dismiss directors.
Preference shares
Shares of a different class from ordinary shares which have a preferential position over ordinary shares on the payment of dividends (normally on a fixed amount).
Bonds
Documents recording a loan specifying the date of its maturity and the rate of interest to be paid at each specified period. Common name for fixed interest securities of more than one year in term.
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TYPES OF SECURITIES TRADED ON KLSE
Debenture
Fixed interest securities bearing a maturity date and a specified rate of interest. The assets of the borrowing company are charged against the debenture issue; details of the charge are included in a debenture deed drawn up to protect the debenture holder. In essence, they are a loan to a company.
Loan stocks
Securities issued by a company for a loan made by investors.
Loan stocks may be secured, unsecured, convertible or non- convertible, but are often unsecured, unlike debentures.
Unsecured loan stocks
Unsecured loan stocks carry higher risk than debentures, and in the event of a winding-up, unsecured loan stocks holders rank alongside all other unsecured creditors.
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TYPES OF SECURITIES TRADED ON KLSE
Convertible loan stocks
Carry the right to convert into ordinary shares of the company on pre-arranged terms and within a limited period. The objective of issuing a convertible loan stock is to obtain fixed interest finance at a relatively low rate of interest and at the same time, make it attractive to potential holders by offer of equity participation at a later date.
Loan notes
Securities issued by a company for a loan made by investors.
Property trust units
Units in a unit trust which invests in real estate.
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TYPES OF SECURITIES TRADED ON KLSE
Warrants / Transferable Subscription Rights (TSRs) Give the holders the right, but not the obligation, to subscribe for new ordinary shares at a specified price during a specified period. The warrants / TSRs, usually attached to an issue of loan stock, are issued by the company and usually have a maturity period of five to ten years.
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TYPES OF SECURITIES TRADED ON KLSE Rights
Companies raised additional capital by offering to existing shareholders the rights to subscribe for new shares, at a price usually below the current market price. These rights, while current, attract a price of their own and can be traded on the KLSE.
• Closed-end funds
A closed-end fund is a listed company which invests in shares of other companies. A closed-end fund has a fixed number of shares in issue at any point of time, the price of which will fluctuate according to new asset value and market forces.
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TRADING ON KLSE
Trading Sessions
Trading takes place five (5) days a week (Monday – Friday), other market holidays (when the Exchange is declared closed by the KLSE Committee). There are two (2) trading sessions on any market day:
Morning Session - 9:00 a.m. – 12:30 p.m.
Afternoon Session - 2:30 p.m. – 5:00 p.m.
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TRADING ON KLSE
SCORE, the acronym for System On Computerised Order Routing and Execution, is the KLSE’s fully automated trading system. SCORE replaced the tradition open out-cry trading system.
The automated trading system comprised two (2) major computer systems:
– The SCORE which is the central computer engine responsible for the matching of all orders.
– The WinSCORE system that is the stockbroking company front-end trading system which is responsible for credit control management, order and trade routing as well as confirmation.
– The stockbroking companies can also use the terminals to view the KLSE’s stock market information on a real-time basis.
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TRADING ON KLSE
Semi-Automatic May 1989 – Started
13 November 1989 - completed Fully Automatic
October 1992 – started 30 November 1992 – completed.
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TRADING ON KLSE
Broker Front End 1994 – Started
February 1995 - completed Electronic Client System (ECOS)
November 1995
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262 264 268 264 256 253 253 250 253 261 271282 284 288 291 295307285324369 413
478 529
621 708736757795 807
0 8 4 6 4 3 5 0 5 8 10 14 4 5 5 6 13 31 39 45 44 66 51 92 88
28 21 38 14 0
100 200 300 400 500 600 700 800 900
73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 01 Total Listed Companies New Companies Listed
As at 7 Sept. 2001 Main Board - 514 Second Board -293 Total - 807
NUMBER OF LISTED COMPANIES ON KLSE 1973 TO 7 SEPT. 2001
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0 200 400 600 800 1,000 1,200 1,400 1,600 1,800
Volume (in Million)
1980 1981
1982 1983
1984 1985
1986 1987
1988 1989
1990 1991
1992 1993
1994 1995
1996 1997
1998 1999
2000 Year
Volume
HIGHEST TURNOVER FOR THE DAY 1980 TO 2000
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TRADING ON KLSE
Trading Lots
Board Lot - 1,000 units
*Reduce Board Lot - 200 units
*Objective of Reduced Board Lot
Increasing the accessibility of higher priced securities to a larger number of investor.
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TRADING ON KLSE
Securities To Be Traded In Reduced Board Lot
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COMPANY STOCK NO. EFFECTIVE DATE 1. MENTAKAB
2. KRAMAT 3. KUCHAI 4. MATSUSHITA 5. SUNGAI BAGAN 6. BUKIT KATIL 7. AMMB*
8. AYER MOLEK 9. KLUANG 10. PARIT PERAK 11. INCH KENNETH 12. RIVERVIEW 13. MALAYAN BANKING * 14. GENTING*
15. OYL 16. BAT*
25182151 21863719 25692321 10152313 2453 25342607 2542 1155 31824014 4162
1 September 1995 1 September 1995 1 September 1995 8 December 1995 8 December 1995 8 December 1995 8 December 1995 8 December 1995 8 December 1995 8 December 1995 8 December 1995 8 December 1995 8 January 1996 8 January 1996 22 January 1996 20 September 1996
REFERENCE PRICE
Reference Price - compute the upper and lower limit price.
“Reference price” means one of the following: - (i ) the closing price, or
(ii) if for two (2) consecutive sessions of one trading day no trading has been done for a particular securities, the reference price for that securities can be one of the following: - (a) the limit buy price at market close, if it is greater than
the last reference price, or
(b) the limit sell price at market close, if it is less than the last reference price, or
(c) the reference price of ex-entitlement securities, shall be as determined by the Exchange
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LIMIT PRICE
• The highest/lowest price a stock can be traded for each trading session is 30% higher/lower than the reference price.
• However, for securities being traded for a trading session with reference price of below RM1.00:
(i) the “upper limit price” meaning the highest price such as a securities can be traded shall be 60 bids which is equivalent to 30 sen rounded to the lower bid
(ii) the “lower limit price” meaning the lowest price a securities can be traded shall be 60 bids equivalent to 30 sen rounded to the higher bid.
• For securities being traded for a trading session with reference price equal to, or above RM1.00, the prescribed regulations on upper limit price and lower limit price, as currently being practised shall remain.
(Members’ Circular R/R of 1998 dated 26 February 1998).
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MINIMUM BIDS
Less than RM1.00 - ½ sen
RM1.00 – RM2.99 - 1 sen
RM3.00 – RM4.98 - 2 sen
RM5.00 – RM9.95 - 5 sen
RM10.00 – RM24.90 - 10 sen RM25.00 – RM99.75 - 25 sen
Over RM100.00 - 50 sen
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ORDER ENTRY
Direct Order Entry by the stockbroking using WinSCORE.
Order can be entered from half an hour before the actual trading sessions begin until the end of that session.
Order placed between 8:30 a.m. – 9:00 a.m. for morning session and 2.00 p.m. – 2:30 p.m. for afternoon session are randomised.
Order entered during the trading session are on a first come shall be matched according to price and time priority.
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ORDER ENTRY
An order can be cancelled or reduced (if not fully executed) as to that part of order which is unexecuted.
The SCORE system limit orders to maximum of 500 lots of
a particular stock.
All orders must be entered within a certain price range, called upper limit price and lower limit price
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ORDER CONFIRMATION
Order are automatically time stamped by the system and confirm as accepted by way of an order status on-line screen on the workstation.
Order confirmation on a printer/screen.
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TRADE CONFIRMATION
The status can be viewed on the order status on- line screen on the workstation.
Trade confirmation on a printer/screen.
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WINSCORE INTEGRATED TRADING OPERATION FLOW DIAGRAM (ORDERS)
DEALER’S TERMINAL PRINTER
WinSCORE SERVER
BROKER OFFICE COMPUTER TRADE LMIT INFO
ORDER CONFIRMATION
UPDATE MASA STOCK INFO
SCORE HOST COMPUTER MASA HOST COMPUTER
WinSTOCK INVESTORS
CONFIRMATION
REAL-TIME MARKET INFO
REAL-TIME MARKET INFO
ORDER CONFIRMATION ORDER
ORDER
VALIDATE ORDER
5 6 1
4
5 3
4 1
2 5
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TYPE OF ORDER
Limit Order - To be executed at the entered price or better.
Market Order - To be executed at any price within the upper and lower limit.
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MATCHING
Matching Interval
• The KLSE reserves the right to set the time interval for matching between 1 second to 99 seconds.
Matching Priority
• Market Order – will be given the first preference.
• Limit Order – (i) Preference is given to highest Buy
Orders and Lowest Sell Orders.
(ii) When Buy/Sell Orders are quoted at the same price, preference will be
based on time.
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CALL MARKET SYSTEM
The KLSE uses the Call Market System to determine the matching price. The rules are as follows:
(i) The match price of a stock is the price at which the most number of lots can be executed.
(ii) Where there is more than one price at which the most number of lots can be executed, the closest to the last traded price shall be the matching price.
(iii)All Buy Orders quoted above the matching price and all Sell Orders quoted below the matching price are executed at the matching price.
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CALL MARKET
DISPLAY CUMULATIVE QUANTITY
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B U Y S E L L
C U M
Q T Y O R D E R Q T Y P R I C E
( R M ) Q T Y O R D E R C U M Q T Y
M A T C H Q T Y
1 7 5 2 2 5 3 2 5 3 2 5
2
1 5 3 4
1 0 0
7 5 5 0 1 0 0
* M A R K E T O R D E R * 1 .3 5 1 .3 4 1 .3 3 1 .3 2 ( 1 .3 1 ) 1 .3 0 1 .2 9 1 .2 8 1 .2 7 1 .2 6 1 .2 5
2 5
5 0 6 0 4 0 1 0 0
1
3 2 1 3
2 7 5 2 2 5 1 6 5 1 2 5
1 7 5 2 2 5 1 6 5 1 2 5
O P E N I N G M A T C H A T T H E P R I C E R M 1 .3 1
EXAMPLE 1 XYZ COMPANY
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BUY SELL
CUMQTY QTY PRICE
(RM)
QTY CUM QTY
MATCH QTY
270 280 340 420
200
70 10 60 80
*MARKET ORDER*
550 545 540 535
100
10 10 50 100
270 260 250 200
270 260 250 200
Note: Some Sellers benefited selling at a higher price
EXAMPLE 2 XYZ COMPANY
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Note: Some Buyers benefited buying at a lower price
BUY SELL
CUMQTY QTY PRICE
(RM)
QTY CUM QTY
MATCH QTY
160 220 240 250
100
60 60 20 10
*MARKET ORDER*
300 299 298 297
200
10 20 20 60
310 300 280 260
160 220 240 250
TRANSACTION COSTS
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Contract Value (RM) Rate (%)
Retail, Institutional & Interbroker
Up to 100,000 0.75
Above 100,000 Fully Negotiable
Brokerage fee for Direct Business Transactions has already been made fully negotiable since September 1998.
TRANSACTION COSTS
2. Special rebates are extended to Financial Institutions such as:-
Life insurance companies;
General insurance companies;
Superannuation or employees provident funds;
Finance companies;
Asset management companies and unit trust management companies;
Trust companies or institutions.
(refer to Members’ Circular R/R 20 of 1998 dated 16 November 1998)
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MINIMUM BROKERAGE
On loan transaction – RM2.00 On any other transactions – RM5.00
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CLEARING FEE
0.04% of transacted value (payable by both Buyer and Seller) - maximum RM200.00, no minimum
For all direct business, the clearing fee is 0.05% of transacted value (subject to a minimum fee of RM25.00 and a maximum of RM250.00)
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STAMP DUTY
Contract Note - RM1.00 for RM1,000.00 or fractional part value of securities (payable by both Buyer & Seller) Transfer - RM3.00 for RM1,000.00 or
fractional part of value of shares.
Share Certificate - With effect from 1 January 1994, no stamp duty shall be paid on a share certificate.
Fee charged by - RM3.00 per share certificate.
registrar for issuance of certificate
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SETTLEMENT
Securities Clearing Automated Network Services Sdn Bhd (SCANS) provides clearing services for the stockbroking companies.
To facilitate clearing and settlement, the KLSE has established a T+3 Rolling Settlement System.
It reduces the time between execute of trades and settlement of trades, which in turn reduces risk and market exposure.
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TRADING ON CUM ENTITLEMENT Based on T+3 Settlement
Cum Date 1---1---1---1---1---1 Ex-date Lodgement date
1---1---1---1---1---1 1---1---1---1---1---1
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Cum
A prefix meaning “with”. A share quoted “cum-dividend” means the buyer is entitled to a dividend currently attaching to it, similarly with cum-rights and cum-bonus.
Ex
Prefix meaning “without”, the opposite to “cum”. The purchaser is not entitled to dividends, bonus shares or rights previously attached to the share.
Lodgement
The last day that a new holder of a stock can file his right to the newly purchased stock with the appropriate authority in order to be entitled to such things as bonus, rights or dividends.
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Entitlement
When a listed company announced entitlement such as dividends, rights issue or bonus, the shareholders entitled to them are those who are registered in the company’s Register of Members on the entitlement date.
Dividend
The amount of a company’s annual dividend expressed as a percentage of the current price of the share of that company.
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Bonus Issue
Distribution of capital funds (usually from a revaluation of assets or a share premium reserve) to shareholders in the form of shares for which payment is not required.
Rights
Companies raise additional capital by offering to existing shareholders the rights to subscribe for a new shares, at a price usually below the current market price. These rights, while current, attract a price of their own and can be traded on any stock exchange.
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REFERENCE PRICE ADJUSTMENT DUE TO ENTITLEMENT
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Example Bonus & Rights (i) Bonus 1:2
(ii)Rights 2:3 @ RM3.00 Cum Price = RM10.00
O B R
--- --- ----
6 3 4
= (6 X 10) + 4(3) = RM5.53 ---
13
Theoretical Ex Price = RM5.50
Theoretical Rights Price = RM5.50 - RM3.00 = RM2.50
BUYING-IN
• If a selling client failed to settle by the due date, KLSE will institute automatic buying-in against the client on the T + 3 market day.
• Buying-In takes place every market day from 8:30 a.m. – 5:00 p.m.
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DETERMINE BUYING-IN PRICE
• The price bided for buying-in by the Exchange in respect of all securities shall be 10 minimum bids above (i) the last recorded sale.
(ii) The last “cum” price in respect of Buying-In for “cum”
contract on or after the Ex-date up to the close of business in the lodgement date, whichever is higher.
• If the securities are not obtained on the first day, the Buying-In shall be continued on the second and each succeeding business day and the bided price shall be raised by five (5) minimum bids until the securities are bought.
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DETERMINE BUYING-IN PRICE
• The Exchange may, if it necessary, suspend the daily increase in the bidding price or revise the bid so that the bidding price shall be not more than 25% above the last recorded sale or the last buying price bids of the previous market day, whichever is the higher.
• The 25% limit imposed shall not be applicable to buying in for special lots. Exchange may increase the bidding price by five (5) minimum bids daily until the securities are obtained.
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DETERMINE BUYING-IN PRICE
• Suspension of counter shall not affect the Exchange’s decision to proceed with the buying-in of the affected securities.
• Delivery on buying-in shall be effected by way of book entry on the date of the buying-in contract itself.
• Payment of securities shall be effected on the first market day following the date of buying-in contract.
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THANK YOU THANK YOU
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