ASCM said contra transactions being an industry norm are still allowed and in effect.
KUALA LUMPUR (Aug 18): The Association of Stockbroking Companies Malaysia (ASCM) has cleared the air by saying the curb on contra trading on certain stocks and securities is an independent initiative by an individual securities firm as its own risk management measures.
The association stressed that such a move is not an industry-wide practice.
ASCM was responding to news report that securities firms had started to demand upfront cash payments for the purchase of certain securities, such as the glove stocks, healthcare-related counters and the structure warrants.
The news report was being blamed for contributing to the heavy selldown of the glove stocks recently, in addition to the news on Covid-19 vaccine becoming available in months which may reduce the usage of disposable rubber gloves as the pandemic is contained.
In a statement, ASCM's Secretariat Office said it was one broking house's independent initiative to curb contra trading of certain counters to manage its business in accordance with its risk appetite.
ASCM said contra transactions being an industry norm are still allowed and in effect. It said the rules of Bursa Malaysia are principle-based and they require the brokers to adhere to the best practices in trading and risk management.
"Capital market stakeholders have always been proactively reviewing the market to effectively manage and mitigate market risk and to ensure a fair and orderly market at all times.
"Each individual broker can implement risk management measures that are best suited to the broker's financial strength and risk appetite," said the association.
The sudden surge in retail interest, which lifted daily trading volume to 28 billion, has made Bursa Malaysia one of the outperforming markets in Asia. The local market has not witnessed such robust retail participation in more than a decade.
By the same token, there is mounting concern over excessive speculative activities on the local bourse considering that daily trading volume of penny stocks exceeded one billion. Consequently, some quarters, who experienced the market crash during the Asian financial crisis and the burst of the dot-com bubble, highlighted the crucial need for prudent risk management by stockbroking firms.
The regulators are keeping an eye on it. Bloomberg reported that the local stock exchange is preparing measures to curb excessive speculation on share prices as individual investors boost stock trading volumes to a record.
Bursa Malaysia Bhd may start issuing market alerts to investors when there is excessive trading in a security and require them to make upfront payments on affected stocks via "designated counters", the stock exchange was quoted saying by Bloomberg.
"There is always a concern that investors are easily influenced by emotion and instinct that can leave them in a vulnerable position," said Bursa Malaysia as quoted by Bloomberg. "Hence, while we continue to drive more retail participation in our marketplace, we also actively pursue our focus to raise the level of financial literacy among Malaysians."