JATS, a quantum leap for Jakarta Stock Exchange
With the operation of the Jakarta Automated Trading System (JATS), a quantum leap in handling transactions has been taken. Inaugurated yesterday by President Soeharto, JATS has actually been operable since last May 22, marking a new era of scriptless trading on the JSX. JATS serves as an integrated system connecting trading, clearing and settlement, depository and broker accountancy.
During the four-month implementation of JATS, trading activities at the JSX have increased accordingly. Daily trading activities increased by almost 40 percent to 2,490 transactions per day by the end of August from 1,780 transactions before the implementation of JATS. Total trading volume increased by 25.8 percent to 42.8 million shares per day worth Rp 140.19 billion (US$61.6 million) by August from 34.05 million shares worth Rp 107.12 billion per day.
Hasan Zein Mahmud, president director of JSX, said by the end of this year trading frequencies on JSX are expected to double to between 4,000 and 5,000 transactions per day worth some Rp 200 billion.
He noted that JATS will help realize the vision of JSX to become one of the largest exchanges in the Asia Pacific region with a strong base of domestic and foreign investors.
To increase domestic investors' participation in the capital market, Hasan said JSX plans to launch a remote trading system, accessible through JATS, next year.
"This move must get full support from brokers and securities houses. If they are reluctant to open branches at the cities where remote trading facilities are available, such trading facilities will not be effective to net local investors," Hasan said.
He promised that JSX would give incentives to securities firms which open branches outside Jakarta. Free information from JSX is one such incentive.
There are currently 197 securities houses acting as exchange members and shareholders in the JSX with each shareholder owning one share. They consist of underwriters, broker-dealers and investment management companies. Several international brokerage firms have established subsidiaries through joint ventures with Indonesian companies.
Enormous potential
JATS is an automated and integrated system of stock trading which incorporates the procedures currently followed by JSX and PT Kliring Deposit Efek Indonesia, the independent firm responsible for clearing and settlements. As its main element and backup, JATS uses a pair of Hewlett Packard 9000, model G50 computers with client-server architecture. "With JATS, JSX solidifies its place as the exchange with an enormous growth potential in Southeast Asia," says Marzuki Usman, chairman of the Jakarta Stock Exchange after its activation last May.
The JATS core is the Trading Engine which acts as the main central processing unit to serve as exchange supervisor, broker firm manager, trader, broadcaster of data, as well as statistical and historical database.
JATS enables market participants to monitor the index constantly. Quicker trading leads to more liquidity in the market, thus making it attractive to both domestic and foreign investors. In turn, a liquid market minimizes the hesitation investors might have about participating in the market. Moreover, remote trading is processed on an equal basis with orders from the trading floor, except for computer response time.
JATS also accelerates the institutionalization of the capital market by remote trading, allowing the brokers to access the market electronically from cities around the country. This has resulted in an increase in participation of domestic investors.
The remote trading galleries provided by PT Bursa Efek Jakarta include a viewing room with TV walls displaying real-time trading information, and reference rooms equipped with research materials on listed companies and the capital market as a whole. Counselors are available to help potential investors better understand the trading system. It has been observed that face to face trading provides a better psychological climate, allows easy supervision and provides more opportunities for improved service to brokers.
While trading is fully automated now that JATS has come on- line, JSX does not operate as a floorless exchange. Broker desks and a center counter still remain the focus of activity.
"We decided that a marriage of the physical exchange and the latest electronic trading methods was the most appropriate approach to best serve our local and international investors," explained Mas Achmad Daniri, the JSX director responsible for implementing the new system.
"By continuing floor trading, we ensure uninterrupted transactions should there be a break in the electronic system," he added. It was also decided that, besides providing a better psychological climate, face to face trading allows easier supervision and provides more opportunities for improved service to brokers.
Articles in this section are complied from materials prepared by Sheila Natesan and Riyadi.