Stock trading automated

Stock trading automated

Efficiency, liquidity and transparency were some of the key
words in President Soeharto's address at the inauguration of the
Jakarta Stock Exchange's automated trading system yesterday. The
Jakarta Automated Trading System (JATS), which began trial
operations last May, is designed to increase the frequency and
volume of transactions, thereby minimizing errors in
transactions, reducing costs and, consequently, improving
efficiency.

The system speeds up transactions dramatically by
computerizing order routing and execution, thereby increasing
market liquidity and making the stock exchange more attractive to
investors. Soeharto said the stock exchange will be performing
its function properly and well when it can provide a transparent
mechanism and protection for the investing public.

The new system ensures that investors are treated fairly and
efficiently in the handling and execution of orders. It is
effective in maintaining and developing liquidity in new markets.

Even though there are many other factors which influence
investors' decisions to buy shares, such as market conditions,
liquidity and interest rates, fair and efficient treatment of
investors is one of the prerequisites for broadening the base of
domestic investors on the Jakarta stock exchange (JSX). Today, as
the President noted, the JSX is faced with the major challenge of
increasing the number of domestic investors.

A broad base of domestic investors is required, he said, to
enable the JSX to play a bigger role in efficiently raising and
mobilizing private savings. A greater number of domestic
investors is also needed to increase market liquidity, in the
sense that entry to and exit from particular shares can be made
efficiently and speedily.

Moreover, the present situation, in which daily trading is
dominated by foreign portfolio investors, is not conducive to the
future development of a sound stock market. Recent experiences
have shown that foreign investors often fail to act rationally
and can make decisions on the strength of wild rumors.

Further down the line, a larger number of domestic investors
is also needed to help improve the JATS' operation through high
capacity utilization. The JATS is designed to route and execute
40,000 orders and process 50,000 transactions every hour. During
the four months of trial operations, the largest number of orders
ever handled by the system in one whole day was only 10,000.

Consistently with the fast developments in information
technology, the JATS offers virtually unlimited opportunities for
further developing the stock market. An opportunity that will
soon be able to be tapped is remote trading. That will contribute
greatly to broadening the base of domestic investors, as people
in other provinces will be able to deal in stocks on the JSX. The
next advance will be the development of scripless trading, as
already practiced on many international stock exchanges.

The JATS also contributes greatly to facilitating fast flows
of information through on-line communications, something which is
very important in view of the crucial role of timely and accurate
information in developing a sound stock market.

The introduction of the JATS will undoubtedly place the JSX on
a level with the stock exchanges in other markets. Even though
the JSX is still the smallest stock market among the ASEAN
countries -- with only about 230 listed companies and a total
market capitalization of approximately US$58 billion -- the
opportunities for market expansion are huge, given the predicted
robust growth of the economy in the years to come and the massive
volume of investment funds that will be required.

It is a happy coincidence that the JATS' inauguration took
place a day after the passing of a new law on the stock exchange,
which provides a stronger legal foundation for the development of
the stock market and better protection for the investing public.