Bourse to get electronic settlement system

JAKARTA (JP): The Indonesian Central Securities Depository (KSEI) will introduce electronic settlement operations in October to boost efficiency amid the significant increase in volume of banking shares, its president said on Tuesday.

Erry Firmansyah said that electronic settlement on the Jakarta Stock Exchange would initially be limited only to shares of 20 companies, mostly banks.

"With electronic settlement, the physical exchange of share certificates during the transaction settlement would be eliminated, thus reducing significant clerical workload."

Erry said it would help ease the burden of the transaction settlement work, particularly concerning shares in the banking sector.

As of last week the total volume of shares traded on the Jakarta Stock Exchange was 752 billion (500 billion of which were banking shares), compared to only about 150 billion in the same period last year.

KSEI director Eddy Sugito said that with the electronic settlement the broker was on line with KSEI. The broker then regularly issues customer account statements similar to those issued by commercial banks to their depositors, he added.

Customer account consists of cash and share accounts.

In the current manual settlement system, Eddy said, the share seller has to physically transfer the shares into the buyers' possession through KSEI, which completes the transaction verification.

With the new system, the physical form of the shares remains at the same place, while the cash and share accounts of the seller and the buyer at KSEI will change accordingly.

"The fund in the seller's cash account would increase as the buyer's decrease," Eddy said, adding that the seller's share account would decrease as a consequence.

Erry said that shares of the companies to be applied in this new electronic settlement system must first be preregistered to the exchange administration agency before their trading could commence.

He did not have the information on the shares of which companies would come under the system.

Erry said KSEI's computer system was in the final stage of the preparation for the turn of the millennium in 2000.

"We are now undergoing a series of final tests of our computer systems for Y2K compliance," Erry said.

He said that Tuesday was the last day for KSEI to replace all units of personal computer in use with new ones to ensure there would no disruption in the Y2K compliance of the entire hardware system at KSEI.

He said KSEI hired consulting firm Ernst & Young to help with preparation for Y2K. (udi)