JSX members need Rp 250m to participate in remote trading
By Berni K. Moestafa
JAKARTA (JP): Each securities firm at the Jakarta Stock Exchange (JSX) must invest at least Rp 250 million (about US$26,500) in new technology to keep up with JSX's plans to implement remote trading later this year, the exchange said.
The JSX president Mas Achmad Daniri said that on top of the initial investment of Rp 250 million, brokerages must also set aside some Rp 150 million each year for operation and maintenance costs.
"These figures are of course only an estimate," Daniri said during a press meeting on Friday.
He said the exchange had conducted studies on what securities firms needed to upgrade to remote trading, and how much they would have to spent on building the system.
The JSX plans to implement remote trading starting next August. Under a remote trading system, traders from outside Jakarta can access the stock market and execute on-line trading.
Consequently, the presence of a trading floor will become unnecessary.
Securities firms must also revamp their front end system from where they receive transaction orders from their clients.
The back office system, a system that handles the settlement of the market transactions, will largely remain unaffected.
"Companies must invest in new hardware, software and a network," Daniri said, adding: "the bourse's trading system must be able to communicate with its members (the securities firms)."
Under the planned remote trading system, securities firms will connect to a network switch, which would route the transaction orders to the JSX's main trading engine.
Securities firms must also lease a remote trading port, the cost of which JSX is currently calculating.
To date, the JSX lists 197 securities firms as its members.
"Some securities companies are already advanced in their preparations, while other smaller ones have to start to build from scratch," he explained.
Daniri added that because of the current economic difficulties, some firms may not be willing to invest in remote trading now.
But he assured that the JSX planned a gradual adoption of the system, and would allow securities firms ample time to prepare.
Although remote trading is scheduled for next August, securities firms would have until the year 2003 to fully adopt the system.
"The point is, that when they (securities firms) are ready, we are ready," he said.
As part of JSX's preparations, he continued, the exchange was now tendering the development of a trading protocol system and the computer network.
"We have 24 companies who have submitted their tender proposals," he said, "of these 24, two will be chosen for the development of a trading protocol system and a network."
He declined to name the JSX's budget for the new systems, saying the information was confidential due to the current tender process.
Based on the JSX's project schedule, it expects to complete the tender process by February.
While awaiting the development of a new protocol and a network, the JSX plans to introduce the public to remote trading.
The JSX estimates that by next April, it will have a new protocol system and a new computer network implemented.
In June, the exchange will conduct a pilot project to test the new system, while also ending its remote trading campaign.
As for the securities firms, the JSX will introduce them to the overall trading system in March, and start registering them for remote trading the following month.
By July, the exchange will audit the securities firms' preparations, hold training sessions, and start the implementation process.
The exchange plans to officially start remote trading on its birthday, Aug. 10.
"We want to offer our traders and investors something new on our birthday," Daniri said.
He added that the exchange would keep its trading floor active until the year 2003, until securities firms were fully prepared.
Securities firms joining remote trading can book higher gains from increased transaction orders through on-line trading, according to the JSX.
They could broaden their customer base to other provinces, simplify transaction procedures, reduce human error during transactions, and make quick and more accurate reports to their clients.
The JSX would enjoy similar benefits from more transactions, and an improved efficiency of its market.
Daniri has said that the implementation of remote trading was necessary to tap the potential of local investors outside Jakarta.
Since the Indonesian stock market has lost its appeal to most foreign investors, Daniri has repeatedly emphasized the need to strengthen local investors.
He also said that remote trading would bring Internet stock trading to its fullest potential.
Among the local securities firms offering Internet stock trading, is PT Makindo which has 250 clients trading over the web.
Makindo director Gunawan Jusuf has said that with remote trading, investors could expect much faster execution of their orders through the Internet. "We're talking minutes here, and in stock trading a minute can make a big difference," he explained. (bkm)