THE STATE OF BURSA MALAYSIA MARKET MICROSTRUCTURES

Market Microstructure could play a function in set uping of import factors such as the reason of investors and the liquidness of securities. These factors have an consequence on systematic hazard of securities, thereby it affect assets pricing. This chapter describes a brief history of Bursa Malaysia and the province of Bursa Malaysia microstructure as on December 31 2008, thereof to cover the whole image sing the trading mechanism and trading regulations of Bursa Malaysia. Thus, the current chapter reviews the trading mechanism in footings of market type, monetary value find, order signifiers and grade of transparence and trading ordinances presently implemented in Bursa Malaysia. Finally the key alterations in Bursa Malaysia market microstructure are presented at the terminal of this chapter.

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Bursa Malaysia: A Brief History

The securities industry in Malaysia has long history which began in 1870s, as an extension of the British corporate presence in the gum elastic and Sn industries. Trading securities in Malaysia through organized exchange begun in 1930 when Singapore Stockbrokers ‘ Association was established. In July 1973, the stock Exchange of Malaysia and Singapore was divided into the Kuala Lumpur Stock Exchange ( KLSE ) and the Stock Exchange of Singapore. The KLSE was incorporated under the companies Act of 1965 ( Sinnakkannu and Nassir, 2006 ) . The KLSE has demutualised on 5 January, 2004. Since April 2004, the name of KLSE has changed to Bursa Malaysia Berhad and Bursa Malaysia has been listed on March 2005.

The Bursa Malaysia growing has accelerated markedly in the past 20 old ages. As on December 31 2008, 977 companies were listed on the Bursa Malaysia. From those, 634 companies were listed on the chief board, 221 were listed on the 2nd board and 122 companies were listed on the MESDAQ Market.

In entire, as on December 31 2008 these companies had a market capitalisation of $ 189 billion and entire value of portion trading of $ 93 billion as shown in Figure 2.1 which illustrates the market capitalisation and value traded of Bursa Malaysia from 1990 to 2008 in 1000000s US $ .

Figure 2.1 Total value of portion and domestic market capitalisation of Bursa Malaysia adapted and adopted from ( WFE, 2007 )

The chief stock index of Bursa Malaysia is the Kuala Lumpur Composite Index ( KLCI ) which was introduced in 1986 in order to reflect the Malayan stock market public presentation. KLCI is a capitalization-weighted index and comprises of the multi sector companies. Figure 2.2 illustrates the KLCI motions from 1990 to 2008.

Bursa Malaysia Market Microstructure

The market microstructure research is of import for exemplifying the behaviour of monetary values and markets, which has direct influence on the market ordinance, and in the design and preparation of trading mechanisms ( O’Hara, 1995 ) . Market ordinances order how and when orders can be submitted and how orders are processed, accordingly it find how monetary values are formed. Changing in the market ordinance can be merely implemented by securities exchange, while the altering in trading mechanisms requires existent investing and takes clip to be implemented, hence in this survey market microstructure dimensions have been classified harmonizing to trading mechanism and trading ordinance.

Trading Mechanism

Trading mechanisms refers to the methods of trading securities. They are determined by several declines including market type, monetary value find, order signifiers and grade of transparence.

Market Type

Securities market type has three dimensions which are grade of continuity, trust on market shapers and grade of mechanization ( Madhavan, 2000 ) . With respect to the grade of continuity, there are two types of market: the first 1 is the ‘call market ‘ where merchandising and purchasing orders are grouped together during an interval period of clip and transact at individual monetary value, which equates the measure supplied to the measure demanded. The 2nd 1 is the uninterrupted auction market, where merchandising and purchasing orders are executed whenever submitted. The executing monetary value represents the highest monetary value that a purchaser is willing to pay and the lowest monetary value that a marketer is willing to sell ( Chang et al. , 1999 ) . With regard to the trust on market shapers, securities exchange considered as quote-driven market where monetary values are determined from citations made by market shapers or specializers. While securities exchange considered as order-driven market or auction market where monetary values are determined by the publication of orders to purchase or sell portions via public investors without market shapers ‘ intermediation. ( Madhavan, 2000 ) .

Refering the grade of mechanization, merchandising mechanisms can run either on the floor or by agencies of electronic systems. Sing the first type, trading mechanism relies on an unfastened call method where exchange uses face to confront verbal and hands signal. In the 2nd type, trading mechanism employs an electronic trading system where participants identify in the orders.

With these multidimensional market types a overplus of picks for the trading of securities are available to the securities exchanges. Table 2.1 represents the market type of Bursa Malaysia. Currently, sing grade of continuity, Bursa Malaysia uses call market in the pre-opening and pre-closing trading stages, and uninterrupted auction during uninterrupted trading stage. With regard to reliance on market shapers, presently there are no market shapers or specializers existed in Bursa Malaysia, thereby the monetary values are determined in the footings of orders geting at a cardinal trading system. Turning to the grade of mechanization, the present procedure of trading in Bursa Malaysia operates by a cardinal and to the full computerized order fiting system, which accumulates keyed in orders by brokering companies ( Ramiah et al. , 2008 ) .

Table 2.1 The market type of Bursa Malaysia.

Degree of Continuity

Market Opening and Closing Mechanism

Call Auction

Intraday Trading

Mechanism

Continuous Auction

Reliance on Market Makers

Market Opening and Closing Mechanism

Order driven

Intraday Trading

Mechanism

Order driven

Degree of Automation

Market Opening and Closing Mechanism

Electronic system

Intraday Trading

Mechanism

Electronic system

Trading Sessions and Price Discovery

A trading session is a defined period of clip, consists of several stages from the pre-opining stage to the shutting stage where the trading of securities may take topographic point. Each stage within trading session implies a procedure of trading and monetary value find under expressed trading regulations.

Trading in Bursa Malaysia is unfastened for 5 yearss a hebdomad from Monday to Friday, except for public and other market vacations. Bursa Malaysia splits the trading twenty-four hours up into a forenoon and afternoon session from 9:00 to 12:30 and from 14:30 to 17:00 severally. Each trading session goes through a series of stages which are opening, uninterrupted trading, pre-closing, shutting and trading at last, therefore, there is a sum of 6 trading hours each working twenty-four hours. In add-on, there are pre-opening stages in the forenoon from 8:30 to 9:00 and in the afternoon from 14:00 to 14:30 each working twenty-four hours, as shown in Figure 2.2.

Figure 2.2 Trading Sessionss in Bursa Malaysia adapted from ( BMSB, 2007 ) .

The trading session starts with pre-opening stage. In this stage of trading, market orders and bound orders are allowed to be entered ; all orders are submitted and batched for executing at the Theoretical Opening Price ( TOP ) which is calculated and displayed in real-time to the market for each security by the trading system, but minutess are non taken topographic point before opening the session. During this stage, agents besides may go on to come in, modify and delete orders. Order entries, alteration and omission may alter the TOP, when these occur, the system would find the new TOP and expose it to the market. The TOP of a stock is the individual equilibrium monetary value at which the most trades can be executed and used to find gap every bit good as the initial monetary value after a trading arrest and out trading position occurs. When the pre-opening period completed, trading system would automatically put to death and fit orders at opining monetary value, which is the last TOP, so merchandising would continue to uninterrupted stage ( Ramiah et al. , 2008 ) .

A uninterrupted auction is used during the uninterrupted trading stage, in this type of auction ; orders can be entered, modified and deleted ; Matching will be based on monetary value and clip precedence ; Market orders and bound orders are allowed to be entered ; Matched commands and asks orders are auctioned off continuously. Matched orders are dispatched from the system, whereas odd orders remain in the system until they are executed or canceled. The dealing citations during this stage are published to the market in existent clip ( Ramiah et al. , 2008 ) .

Continuous trading stage extends to pre-closing stage where market orders and bound orders are allowed to be entered, thereby all orders are submitted and batched for executing at a Theoretical Closing Price ( TCP ) which is calculated and displayed in real-time to the market for each security by the trading system. No minutess are taken topographic point in this stage before the shutting of session. Agents can go on to come in, modify and delete orders during this stage. Order entries, alterations and omissions may alter the TCP. When this alteration occurs, the system will find the new shutting monetary value and expose it to the market. The TCP of a stock is the individual equilibrium monetary value at which the most trades can be executed used to find shutting monetary value. When the pre-closing period is completed, merchandising system will automatically put to death and fit orders at shutting monetary value as the last TCP, so trading will closed, and automatically continue to trading at last stage. During the trading at last stage bargainers can merely come in bound orders, that are matched harmonizing to clip precedence at the shutting monetary value ( Ramiah et al. , 2008 ) .

Order Forms

A bargainer in stock market can reach a securities firm house to put an order, which represents the purpose of the bargainer to sell or purchase a specific stock listed in the secondary market. In world, bargainers have several options when it comes to puting an order to purchase or sell securities with respects to order types. Orders are contingent on a assortment of conditions refering measure, monetary value and clip, whereas the most normally used types of order are the market and bound orders.

Market order is a measure contingent order used to instantly purchase or sell a stock at the best command or inquire monetary value presently available in the market. Market orders are ever guaranteed to be executed every bit long as there are active purchasers or Sellerss in the market. The market order guarantees the measure but non the monetary value, particularly in fast moving markets. The order in fast traveling markets might be executed at different monetary value from real-time obtained monetary value. This drawback in market order can be overcome by puting a bound order. Limit order is monetary value contingent order to purchase or sell a stock at a specific monetary value outside the scope of the current quotation marks. This type of orders allows bargainers to command and vouch the monetary value at which the trade is executed, but it is non guaranteed to be executed unless the specified monetary value is reached.

Another monetary value contingent order is stop order which allows bargainer to protect net incomes or stop loss. The stop order is an order to purchase or sell a stock when the monetary value of the stock reaches a specified monetary value known as the stop monetary value. When a current monetary value ranges stop monetary value, the halt order becomes a market order. A bargain stop order is ever placed at a monetary value above the current market monetary value typically used to restrict a loss or protects a net income on short gross revenues. A halt sell order is ever placed below the current market monetary value and it is used to halt loss or protects net incomes.

Stop bound order is a monetary value contingent order to purchase or sell a stock that combines the characteristics of a stop order and a bound order. This order turns into a bound order when the halt monetary value is attained. Stop bound order gives bargainers more control of when and at what monetary value the order will be executed.

Additionally, there are other types of orders used to command monetary value, measure or executing of trade, such as fill or kill order, which is a market or bound order to purchase or sell a certain stock for a specified measure instantly, in instance the order is non executed in its entireness, it will be automatically cancelled. Another type orders is called all or nil, which is a bound order used to a bargain or sell full sum of measure or non at all, in instance there is deficient measure at a specified monetary value the all or nil order unlike the fill or kill order, it is non cancelled and it remains on the order book as a bound order.

All orders are twenty-four hours orders, that is, valid on and for the twenty-four hours it is placed, unless otherwise specified. However, the bargainer can put good boulder clay cancelled order normally is a bound or halt order, which it remains valid until executed, canceled or expired after a specified period. Furthermore the bargainer can stipulate at what clip the order will be executed. For illustration a bargainer can put market on opening order in the pre speak uping trading stage, this order would be executed at the gap of the trading session at an gap monetary value, besides the bargainer can put market on shuting order in the pre shutting trading stage, this order will be executed at the shutting stage at shutting monetary value.

Trading procedure in Bursa Malaysia begins when an authorised bargainer, who has a trading history and a cardinal depositary system history via a stock broking company, gives his agent an order to purchase or sell a specified figure of stocks of a certain listed company at a specified monetary value and order type. Thereby the orders are keyed into the trading system terminal at the stock broking company. The orders go through the trading web to the Bursa Malaysia trading system and instantly the order verification is routed back to the stock broking company ( BMSB, 2008 -d ) . The current trading system implemented in Bursa Malaysia supply a broad assortment of order types such as market, bound, fill or kill, market on opening, market on shutting, halt, orders but merely a few order types are active. The bargainer presently can put orders to purchase or sell securities in Bursa Malaysia in the forenoon session stages, and the same is true for afternoon session as revealed in table 2.2.

Table 2.2 Order types in each trading stage in Bursa Malaysia.

Trading Phase

Order Types

Pre-Opening

Market order

Limit order

Continuous Trading

Market order

Limit order

Pre-Closing

Market order

Limit order

Trading at Last

Limit order

Through the pre-opining trading stage market and bound orders are allowed to be entered ; these orders are executed at the gap of trading at TOP. During the uninterrupted trading stage market and bound orders are allowed to be entered. Each incoming order is checked instantly for possible executing in this stage. Market and bound orders are allowed to be entered in pre-closing trading stage. These orders are executed at the shutting stage of trading at TCP. In the trading at last stage merely limit orders can be entered.

All entered orders electronically are transmitted to the trading system. The trading system would so fit these monetary values and orders. Once duplicate is completed, merchandising would corroborate the successful minutess back to the agent and besides disseminate the same information to the market. The agent in bend confirms with his client the dealing inside informations. The system besides transfers the trading inside informations to securities uncluttering automated web system ( SCANS ) for clearance. Transaction clearance between agents takes topographic point by Bursa securities glade ( BSC ) , which is a subordinate of Bursa Malaysia. Transaction cleared on three working yearss harmonizing to T+3 turn overing colony system. Therefore, all payments are made by the agents, on behalf of their clients to the Bursa securities uncluttering through to the full automated banking and the cardinal depositary system.

Transparency

Market normally is crystalline when high measure and quality of information sing current and past monetary values, quotation marks, deepnesss, volumes and the individualities of market participants are quickly available to the populace. In this sense ‘market transparence refers to the ability of market participants to detect information about the trading procedure ‘ ( O’Hara, 1995 ) . When discoursing market transparence, it could be divided into pre-and post-trading dimension. Pre-trading transparence refers to the airing of information about the limit-order book, command and inquire citations, orders flow, individualities of market participants, market deepness. Post-trading transparence refers to the handiness and speed of airing of the information to the public about merchandising inside informations such as volumes, monetary values, bargainer individualities and dealing clip.

Bursa Malaysia provides high degree of information in real-time to the investors and agents about pre-trading, which includes: 5 best monetary values of bound order book, declarative auction monetary value ( IAP ) , declarative equilibrium volume ( IEV ) , market deepnesss, whereas the concealed order is non allowed and no agent ID displayed. With respect to the post-trading, Bursa Malaysia disseminates real-time information to the investors and agents on trading activities, which includes: minutess monetary values, volumes, indoors trades and off-market trading. Bursa Malaysia permits some exclusions to the immediate coverage of the off-market trades. Table 2.3 illustrates Pre- and Post- transparence of Bursa Malaysia

Table 2.3 Pre- and Post-Transparency of Bursa Malaysia.

Pre- Trade

5 best monetary values of bound order book

Market Order

Indicative Auction Price ( IAP )

market deepnesss

Indicative Equilibrium Volume ( IEV )

Post -Trade

5 Best Monetary values

Market Order

Minutess monetary values

Volumes

Inside Trade

Off-market trading

Market Regulations

Market Regulations refer to the regulations of trading securities defined by securities market to command assorted facets of trading procedure, such as the regulations of order precedence, tick size and spread, naming, market section, monetary value thresholds, trading position, short merchandising and off-market trading.

Rules of Order Priority

Matching of security orders precedence is given harmonizing to certain standards determined by securities exchange. Since the measure contingent orders match at the best available monetary values, they are given precedence and executed before monetary value contingent orders. For case, monetary value and clip precedence regulations take topographic point in the uninterrupted auction markets where market regulations frequently require the highest of command or lowest of ask monetary value order received to be executed foremost. In instance of two commands or asks are received at the same monetary value, the first entered command or inquire order is given precedence and is executed foremost. Unlike the uninterrupted auction markets, the trader markets do non run under monetary value and clip precedence regulations. In this type of markets, it is a sine qua non for securities firms to seek the preferred monetary values for bargainer orders.

Bursa Malaysia during uninterrupted trading stage is considered as uninterrupted auction market, and the market orders have precedence over bound orders. Monetary value and clip precedence regulations are applicable during intraday trading mechanism, whereby monetary value precedence means that the higher the command monetary value the better the opportunity, it will be matched by a marketer, similarly, the lower the ask monetary value the better the opportunity, it will be matched by a purchaser. Time precedence means that if there are multiple orders with the same monetary value, the clip at what the order was entered will go a factor in finding order which has matching precedence. Market on speak uping orders are given a precedence over Limit orders at the last generated Top when the market opens. Market on shuting orders are given a precedence over Limit orders at the last generated Transmission control protocol when the market closes ( BMSB, 2008 ) .

Rules of Tick Size and Spread

The minimal alteration allowed by the stock exchanges in the monetary value, a security could hold either up or down, is known as a tick size. Tick size could be in decimals or fractions such as eighths or sixteenths ; it could besides be fixed or varied within different monetary value scopes. Tick size is an of import factor finding the command ask spread, which is the difference between a security ‘s command monetary value and its ask monetary value. The size of the spread is attributed to liquidness and transparence of the market, that is, more liquidness and transparence in the market conveying command ask spreads lower. In quote goaded market, traders buy stocks at the ask monetary value and sell at the command monetary value. Therefore, the size of the bid-ask spread is relative to the size of the trader ‘s net income.

Bursa Malaysia applies decimals tick commands and asks for portions within assorted monetary value scopes and different minimal commands as revealed in table 2.4 ( BMSB, 2008 -c ) .

Table 2.4 the minimal commands for the different monetary value scopes in Bursa Malaysia

Market Price of Share

Minimal Commands

Below RM1.00

1/2 sen

RM1.00 up to RM2.99

1 sen

RM3.00 up to RM4.98

2 sen

RM5.00 up to RM9.95

5 sen

RM10.00 up to RM24.90

10 sen

RM25.00 up to RM99.75

25 sen

RM100.00 and above

50 sen

Rules of Listing

Securities exchanges have listing demands to O.K. naming portions of companies in conformity with listing regulations. Securities exchanges have different subdivisions where companies would be listed. Securities are allocated to a peculiar subdivision of market whereby different trading mechanism and trading regulations are carried out based on a figure of standards such as company size, liquidness and trading activities.

Bursa Malaysia requires the listed companies to follow with revelation demands so that investors are able to do informed determinations. The listed companies are distributed into chief board, 2nd board and MESDAQ market. The distribution is based on different listing demands: big capitalized companies listed on the chief board, medium sized companies listed on the 2nd board ( BMSB, 2008 -a ) and high growing and engineering companies listed on MESDAQ market ( BMSB, 2008 -b ) . Table 2.5 shows the minimal issued and paid-up portion capital required for listing in Bursa Malaysia.

Table 2.5 the lower limit issued and paid-up portion capital required for listing in Bursa Malaysia.

Main Board

Second Board

MESDAQ

RM 60 million ( USD16.1022 million )

RM 40 million ( USD10.7348 million )

RM 2 million ( USD0.5367 million )

RM 20 million

( USD 5.3674 million ) For Technology Incubators

Rules of Market Sections

Trading of securities in Bursa Malaysia is conducted in the four market sections which are: foremost, normal batch market where securities traded in board batch ( 100 unit per batch ) ; 2nd, uneven batch market where securities traded in a measure from 1 to 99 units ; 3rd, buying-in normal market where a participant organisation, holding sold securities, fails by the scheduled bringing clip to do available in the relevant securities account, thereby Bursa Malaysia, straight buy-in against the concerned participant organisation, without notice at T+3 ; and the 4th is the direct concern dealing ( DBT ) market ( Off-market trading ) where minutess of portion conducted outside the formal exchange, for illustration traversing dealing between two participants ( Ramiah et al. , 2008 ) .

Rules of Price Thresholds

Price threshold refers to the scope of monetary value motion ( maximal monetary value additions or lessenings ) from the old shutting monetary value permitted by securities exchange during one trading session or one trading twenty-four hours.

Bursa Malaysia uses monetary value thresholds regulations to command the motion of monetary values. The monetary value scope of securities is determined upon the mention monetary value which in most instances is the old trading session ‘s last done monetary value. If the mention monetary value is above RM1, so the limit-up monetary value motion is 30 per centum of the mention monetary value and the limit-down is 30 per centum of the mention monetary value. If the mention monetary value is below RM1, so a limit-up is absolute RM0.30 above the mention monetary value and the limit-down is absolute RM0.30 less than the mention monetary value. These thresholds are valid at least for one session ( Ramiah et al. , 2008 ) .

Rules of Trading Status

Securities exchanges use specified regulations in certain fortunes that require discontinuing the matching of one stock or securities group. Such procedure normally anticipates a intelligence proclamation or corrects an order instability. Implementing such regulations would increase the market efficiency by giving all investors equal chances to measure intelligence and do either purchasing, selling or keeping determinations which are based on the reaching of new information.

Bursa Malaysia applies regulations of trading position in order to command the trading activates. The current position regulations of securities implemented in Bursa Malaysia could act upon a group of securities. The trading position of the group securities is treble: foremost, the normal position of trading is authorized when the orders relevant to the securities group could be entered, modified, cancelled and matched. Second, the interrupted position indicates that orders relevant to the securities group could be entered modified and off, but would non be matched. Third, the out position indicates that orders related to the securities group would non be entered, modified, cancelled or matched. The alteration of trading position depends on the certain fortunes that affect the group of securities. The table 2.6 illustrates the trading position and the fortunes when it is used ( BMSB, 2008 ) .

Table 2.6 the trading position and when it is used. adapted and adopted from ( Ramiah et al. , 2008 ) .

Trading Status

when it is used

Authorized

When market is in normal state of affairs

Interrupted

When the circuit ledgeman for the securities market is triggered at the first degree ( more than 10 % but less than 15 % ) or is triggered at the 2nd degree ( more than 15 % but less than 20 % )

Forbidden

When the circuit ledgeman for the securities market is triggered at the 3rd degree ( equal or more than 20 % ) .

In add-on to the foregoing, the trading position of a peculiar security is besides determined by Bursa Malaysia depending on certain trading regulations. The trading position of the peculiar security is besides treble: foremost, the normal position during the trading session is unfastened when the orders with regard to the security could be entered, modified, cancelled and matched. Second, the reserved position indicates that orders refering the security could be entered, modified and cancelled, but orders machining would be denied ( similar to the security position in the pre-opening stage ) . Third, the suspended/frozen position indicates that orders sing the security would non be entered, modified, cancelled and matched ( BMSB, 2008 ) . The trading position of a peculiar security is changed harmonizing to certain fortunes impacting the security as revealed in table 2.7.

Table 2.7 the trading position of a peculiar security and when it is used. adapted and adopted from ( Ramiah et al. , 2008 )

Trading Status

when it is used

Open

When security is in normal state of affairs during trading session

Reserved

When opening monetary value of the securities is outside threshold

When Market order for the securities is non to the full executed

When merely one Market Order in the order book for the securities

Suspended / Frozen

When gap of trading of the securities has been delayed because of unusual fortunes.

When Bursa Malaysia has been advised that the issuer of the securities is about to do a corporate proclamation.

When trading in the implicit in securities ( for warrants, structured warrants, loan stocks and indices ) have been suspended.

Rules of Short Selling

When an investor anticipates that the monetary value of a certain stock will lift up in the hereafter, purchasing and keeping the security could be the best scheme. Conversely, when an investor believes that the monetary value of a certain stock will diminish in the hereafter, selling the security could be considered as the best scheme. In this instance if an investor does non keep the stock, he can sell in short, which means that he borrows an sum of stocks from the agent and selling it in the market trusting that the monetary values will travel down. Then the investor can purchase that sum from the exchange and gives it back to the agent. Thus the difference between the sell monetary value and purchase monetary value would be the investor net incomes or losingss.

Since short Sellerss possess of import information and their trades are of import achievements impacting stock monetary values efficiency ( Boehmer et al. , 2007 ) . securities exchanges implemented restricted regulations sing the short merchandising, in some exchanges short merchandising is non allowed, while it is permitted in others. Bursa Malaysia allows short merchandising to certain listed companies. In Bursa Malaysia, trading in regulated short merchandising is allowed by separate history different from normal trading history. ( Ramiah et al. , 2008 )

Rules of Off-Market Trading

Off-market trading refers to the dealing stocks of listed companies which occur outside a formal securities exchange. Off-market minutess are conducted through dialogue instead than an auction system. The ground for utilizing Off-market trading is normally to transact large block of stock without impacting the stock monetary values.

Off-Market trading is allowed in Bursa Malaysia which is known as direct concern dealing ( DTB ) . It is used to transact between two stock broking companies and/or to transact between two clients within a stock broking company. ( Ramiah et al. , 2008 )

Transaction Costss

Transaction costs are the sum of money spends to purchase or sell securities ; it could be as expressed dealing fees or inexplicit, for case, the market impact cost, the cost of garnering information and the cost of supervising the house ‘s activities in an imperfect market. Lowering such costs may pull more bargainers and increase market efficiency. The expressed dealing costs in Bursa Malaysia are quadruple: foremost, the securities firm fees which is collectible by both purchaser and marketer, will be the minimal prescribed or on a to the full negotiated footing between the agent and its clients, capable to a upper limit of 0.70 % of the contract value, whichever is higher. Table 2.8 shows the minimal securities firm rates.

Table 2.8 the minimal securities firm rate of trading in Bursa Malaysia

Class of Trade

Minimal Brokerage Rate

Inter-broker

Fully negotiable

Institutional

Fully negotiable

Retail trades valued above RM100,000

0.3 % of contract value

Retail trades valued below RM100,000

0.6 % of contract value

Online routed retail trades

Fully negotiable

Trades executed less than a board batch

Fully negotiable

Trades where hard currency upfront has been given prior to the executing of the trades

Fully negotiable

Same twenty-four hours purchase and sell trades

0.15 % of contract value

Second, the glade fees are divided into two types, the first 1 is the novated, which is 0.03 % of the dealing value collectible by both purchaser and marketer with a upper limit of RM1000.00 per contract, the 2nd 1 is the direct concern, which is 0.03 % of the dealing value collectible by both purchaser and marketer with a upper limit of RM1000.00 per contract and a lower limit of RM10.00. Third, the cast responsibility which is RM1.00 for RM1000.00 or fractional portion of value of securities collectible by both purchaser and marketer, the cast responsibility will be remitted to the upper limit of RM200. Fourth, the enrollment fees which is RM3.00 fee is charged per portion certification and is collectible to the company registrar for issue of new certifications.

Key Changes in Market Microstructure

As a portion of Bursa Malaysia, uninterrupted attempt to better the market efficiency, major alterations have been taken topographic point in its microstructure in footings of trading mechanism and market ordinances during the last two decennaries. These major alterations have been done to increase the liquidness, to heighten informed investment and to cut down the dealing and information costs, The alterations covered different facets of Bursa Malaysia market microstructure, which include the undermentioned: implementing of electronic trading and colony system, reforming of KLSE CI and presenting new indices, revamping the trading ordinances, doing amendments to the listing demands, cut downing of expressed dealing costs, opening entree to foreign investors and listing of foreign companies, and heightening market transparence ( for more inside informations about the cardinal alterations in Bursa Malaysia market microstructure from 1990 to 2008 refer to Appendix A ) .

Drumhead

A brief history of Bursa Malaysia is presented in this chapter. The current chapter has discussed the trading mechanism in footings of market type, monetary value find, order signifiers and grade of transparence and trading ordinances presently implemented in Bursa Malaysia to run the trading of securities, in item, every bit good as presented the cardinal alterations in Bursa Malaysia market microstructure sing trading mechanism and ordinance for the period of last two decennaries.

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