New Straits Times, 15 March 2000
T + 3 system will boost KLSE's liquidity
Plans by local stock market regulators to reduce the stock transaction period from five to three days are positively viewed as they will increase liquidity in the Kuala Lumpur Stock Exchange.
Malaysian Investors' Association president Dr.P.H.S. Lim said the new ruling would prevent speculators from dominating trade. " The shorter transaction period will promote an environment in which there will be more genuine investors rather than speculators."
A foreign news agency yesterday reported that Malaysia planned to shorten the period it takes to settle stock transactions in a bid to improve the efficiency of the local financial industry.
It said the securities regulator planned to implement new rules by September. Investors would have to pay for stock purchases within three days of the transaction, in what was called the "T+3" system.
Currently, traders have up to five days to settle. Lim said the shorter time would also help to do away with the many contra deals which were speculative in nature.
Contra play refers to to the buying and selling of shares by an investor within a given timeframe in the hope of making a profit, and not paying the actual value of the share if the prices go down.
On the other hand, he said genuine investors who had strong financial standing would face no problem in coming up with money to pay for losses incurred.
Pong Teng Siew, head of research at Jupiter Securities Sdn Bhd, said the move would change the industry's risk profile and stimulate new investment interest in the market.
It would reduce the number of contra players, the volume of brokers' business and working capital requirement of brokerages. "The operating risks of brokerages will be substantially reduced because credit exposures to contra deals currently form the biggest risk to stockbrokers," he explained.
He also said the move was initiated by the KLSE and Securities Commission. - Bernama