By Ravi Ladduwahetty
With the new automated trading system in the Colombo Stock Exchange wreaking havoc, the CEO of the exchange refused to divulge how much was spent on the system, saying it was not for public knowledge.
"The execution engine of the new ATS-7 has been working properly, but brokers have expressed concerns on issues relating to the front end. We are addressing the issue and we will be implementing the changes to the front end in the last week of March and in the second week of April," Colombo Stock Exchange CEO Surekka Sellahewa told The Island Financial Review last night.
When asked for the cost of the new ATS system, she said: "The media did not need to know that. What is the problem? Is The Island going to pay for it?"
When continuously pressed for the costs, she first said: "I don’t know," then, "I forget" and finally she said: "That is a confidential matter which could not be disclosed to the media and to the public.
She also said that the Exchange had taken cognizance of the broker’s suggestions and giving them two releases of the front end at the second week of April. The issues were being sorted out with the network providers, she said.
Responding to a question on the backdrop of the complaints from investors and the brokers about the malfunctions of the system, she said: "In the manual system, there was the Normal List Board and the Odd Lot Board where the normal lot size is 100 shares and its multiples.
"The shares those were traded less than 100 belonged to the odd lot. When the manual lot was changed to the automated system, the same practice was adopted but in the automated trading system, there was no need to have two boards- the normal board and the odd lot board," she said
She also said that the brokers were consulted at the time that the system was upgraded from ATS 4 to 7.1 for which their approval was provided and also from the Rules Committee and the Boards of the of the Colombo Stock Exchange and the Securities and Exchange Commission. "It was at that time that it was decided that the normal lot and the odd lots will be on the same board unlike in the manual system. That is why many people are upset and brokers and investors were concerned about the share trading and the fragmentation of the share," she said.
She also said that some people were concerned about the minimum brokerage fee of Rs. 10, the CDB fee of Rs. 5 and the Rs. 25 for the Custodial Fee. That will be an issue that we will be addressing with an amendment at the CSE Board Meeting today, she said.
The other tragedy was that there were the brokers who were resisting change, she said.
The Colombo Stock Exchange CEO’s comments came in the wake of investors and brokers, in interviews with The Island Financial Review claiming that the upgrade to "ATS 7" system, the market sentiment has been completely destroyed.
"After the implementation of ATS 7 there is hardly anything that could be called as a market," a top Fund Manager stressed adding that it had resulted in the disappearance of foreign buying as well as local institutional buying since investors do not want to put BUY and SELL quotes on the board as you may get hit for only one share by the end of the day.
Further the order books of many shares have also become a mockery day by day since there is only one share buyers and sellers for every ten cents according to stock traders."Under this scenario we urge the Stock Brokers Association to lobby with the CSE and the SEC to immediately replace the minimum lot size to 100 like before and to have a separate board for Odd Lots to be traded" another leading Fund Manager pointed out.
According to him it has been noted that when there is he is buying or selling a particular large quantity of a stock, an inquisitive investor or even a broker could go to the extent of buying or selling one or two shares in order to just find out who is the contra broker. "The funniest part of the system is that now there are instances where the seller ends up paying the brokerage to the broking house and not getting any sales proceeds after someone buys only one share from him."
He explained that when there’s a particular investor who may want to dispose of 100,000 shares (each share valued at less than Rs.15) from his portfolio and if a buyer only buys one share the original investor who disposed of the share ends up paying a total of Rs.15 from his pocket as minimum CDS fees is Rs.5 and minimum brokerage is Rs.10 per transaction after losing the share as well. "In case of stocks of less than Rs.1 in value the whole process has become a tragic comedy" he added.
source - www.island.lk
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