JSX formulating system to protect public interests

JSX formulating system to protect public interests

JAKARTA (JP): The management of the Jakarta Stock Exchange
(JSX) said yesterday that it is now preparing a more
sophisticated surveillance system aimed at enforcing the
protection of public interests.

"We are now trying to improve the quality of both our system
and our human resources," JSX's president, Cyril Noerhadi, told
journalists here after a seminar on introduction to the capital
market.

He promised that the JSX will set a ceiling for price
movements on any one trading day, which will be used as an
indicator of unusual trading.

"But it's not public information so I don't have to tell you
the ceiling that we have established," he added.

An investigation team from the Capital Market Supervisory
Agency (Bapepam), headed by a bureau chief at the agency, I
Nyoman Tjager, found out recently that the alleged insider
trading in Bank Mashill shares, which took place in early April,
was made possible by JSX's poor surveillance.

In the deals of Bank Mashill shares, a director of the bank,
Jensen Koharjo, was accused of insider trading because of his
position as a commissioner in PT Sumatra Central Prima, one of
the bank's major shareholders, which sold its position in the
transactions.

The JSX, however, failed to detect Jensen's role in the
transactions and to get information from the bank about it.

Based on its findings, Bapepam has instructed the JSX's
management to improve its surveillance system.

A former director of the JSX, Stanislaus Say, said that the
JSX should be restructured to improve its market surveillance
role.

He said that under the current structure, the JSX's
surveillance department can not take any quick action because any
contact with listed companies is under the authority of the
listing division or trading department.

"I would say that in the efforts to improve the surveillance
system, the supervision department should have the authority to
contact both the JSX's members and the listed companies,"
Stanislaus told The Jakarta Post yesterday.

Meanwhile, Bapepam's chairman, I Putu Gede Ary Suta, told
journalists after the same seminar yesterday that the agency
would further enforce the protection of the investing public and
would prevent any unfair practices.

Putu also confirmed that the agency has never prevented
investors from conducting high risk practices such as margin
trading.

Margin trading is considered to carry high risks because
investors take the risk of price movements.

"It's the market's decision. We have never banned the practice
of margin trading because it also helps to increase the
transaction volume on the stock exchange," Putu said.

However, he said he was doubtful whether market players are
properly prepared for the risks that come with this practice.

Putu also said that more investors would become interested in
investing in the stock market if the existing market players gave
the public the impression of honesty.

In a meeting with executives of securities companies last
week, he urged the securities firms to start opening client
accounts on the brokerage office because this would also
facilitate market surveillance.

"It's interesting that the daily transaction volume increased
significantly, to an average of Rp 200 billion (US$85 million)
currently. Unfortunately, most big deals were done through cross
transactions, not on regular board," he said.

"This implies that investors are more confident about direct
negotiations than trading on the market," he added.

Moreover, Putu said, although the transaction volume has
increased, the number of client accounts in the brokerage house
has yet to increase.

"So it also seems that brokerage houses might have played
their own portfolios," he added.

He said that such practices most stop. (alo)