Thu, 13 Oct 1994

JSX, SSE and OTC defend separate operations

JAKARTA (JP): Executives of the country's three stock exchanges yesterday defended their plan to continue operating separately despite growing demand for their unification.

Basiruddin A. Sarida, the president of the Surabaya Stock Exchange (JSE) said the unification of the three bourses will be counterproductive because it will not only violate government policy but will also discourage a competition spirit.

"The unification of the three stock bourses is against the government's long-term policy of developing the country's capital market," he said in a panel discussion held by the Association of Indonesian Journalists (PWI).

Speakers at the discussion, which was officially opened by Chairman of the Capital Market Supervisory Agency (Bapepam) Bacelius Ruru, included Tito Sulistio, the president of the Over- the-Counter (BPI) stock exchange, and Felia Salim, the director for research and development of the Jakarta Stock Exchange (JSX).

Basiruddin said that operating more than one stock exchange will offer advantages to both investors and share issuers.

"With the operation of more than one stock market, both shares issuers and investors will have more alternatives," he said. "Investors will have the opportunity to choose whichever stock exchange offers higher returns, while share issuers take the market with lower listing fees."


Business analysts have called on the government to merge the JSX, JSE and the OTC into a single stock exchange in a bid to reduce operational costs.

The operation of the SSE is considered not so effective because over 80 percent of its members are also listed on the JSX and also due to the fact that most of its trading activities take place in its Jakarta branch. The least developed OTC has been also asked to join the integration as most companies, even small- scale ones, still prefer to list their shares on the JSX.

The OTC market was established in 1987 but its trading activities remain dormant. The number of companies listed there totals only 18 at present, consisting of 13 bond issuers and five share issuers. Its trading volume is also quite small, totaling 4.17 million shares worth around Rp 10.2 billion (US$4.85 million) in the whole 1993, as compared to 3.84 billion shares worth Rp 19.03 trillion (US$9.06 billion) on the JSX in the same period.

Tito, the OTC market's president, said that unifying the three bourses will not solve the inefficiency problem or the unpopularity of the market.

He said that the poor performance of the OTC market results from an unclear policy about the mission of each market.

"It seems that the three markets are competing with each other due to the unclear guidance of their operations. What we really want is for them to complement each other," he said.

He suggested that the government issue a clear-cut policy to allow the three stock exchanges to operate for different market segments.

Tito said the OTC, for example, could be allowed only to receive small companies, the SSE to be responsible for medium- sized firms and the JSX for large ones.(hen)