As the name suggests, Direct Market Access (DMA) CFD allows investors to have a direct access to the cash market via CFD. When a DMA order for buying long and shorting stocks is submitted to Phillip CFD, a corresponding stock order is sent to the exchange. When the order is filled on the actual exchange, the investor’s trading platform would be updated accordingly. In this model, the brokerage firm behaves like an ‘agent’ of the client. Phillip CFD provides DMA CFD on Singapore (SGX) and United States (AMEX, NYSE, NASDAQ).
Ig's Direct Market Access (DMA) CFd trading — 25 Oct 2012
KISHORE Rochey was a trading representative for 20 years before calling it quits in September this year. He said that the average net commission earned by his peers has been on the decline, with through-the-grapevine estimates falling from around S$6,000 to S$8,000 a decade ago to about S$1,000 when he left.
"It made no sense to stay around."
Mr Rochey's story is not unique. Market liquidity in Singapore is at a multi-year low, commissions are suffering and many in the industry are either looking for other sources of income or simply moving on.
While many in the industry acknowledge macroeconomic effects in the market, they also blame regulations that have raised the costs for speculative traders and cut spreads and commissions for trading representatives.
In response, Singapore Exchange (SGX) stressed that it cannot jeopardise long-term market quality for short-term liquidity droughts, and noted that it has taken several initiatives aimed at helping the industry.
The numbers do not paint a pretty picture. Market turnover fell 21 per cent in the financial year ended June 30, 2014, to S$286 billion, according to SGX. That is the lowest turnover since fiscal 2006, when the size of the total market was less than what it is worth today.
Looking at turnover as a proportion of market capitalisation, the average turnover velocity in FY2014 was just 40 per cent, compared to 71 per cent back in FY2007.
UOB-Kay Hian Holdings posted a 31.8 per cent decrease in first-half commission income this year, to S$113 million. DBS Group Holdings' brokerage income for the first half of 2014 fell 29 per cent to S$85 million. OCBC Bank matched DBS's decline, with brokerage income dropping to S$26 million.
An executive at a brokerage who deals with remisiers said that the number of trading representatives in Singapore has fallen to about 3,900 in 2013 from more than 4,300 in 2011.
Jimmy Ho, president of the Society of Remisiers of Singapore, remarked: "I quote one remisier who's been in the industry for over 40 years, and he said it's never been like this before."
Those who are still in the game are looking for other ways to make a buck.
Mr Rochey noted that some brokerages are encouraging their remisiers to help refer their clients to specialists of other products and asset classes such as contracts for difference and forex.
"But at the end of the day, when the commissions are so low . . . there's just not enough meat," Mr Rochey said.
A trader who has since moved to another part of the desk said that investors are also looking to overseas markets for more action. Emerging markets such as Thailand, for example, offer more inefficiencies that investors are better able to capture, he said.
"You have to look to where the money is," the trader said. "Thailand, Hong Kong, Indonesia, even the US, where the volatility is there. If you're talking about money flow, in South-east Asia, you don't have to look that far beyond Thailand and Indonesia."
Industry veterans cited a number of factors for the industry's current woes. The first, and most obvious, is that equity trading volumes across the world have not been great ever since the Global Financial Crisis.
"From 2009 until now, the market has gone out, so people don't have the courage to come in big time," Mr Rochey said. "You need a whole new breed of investors to come in and create the volume, who didn't experience the pain of 2008 and 2009. That will take a decade."
Singapore has been hit especially hard because of the penny stock collapse that began in October 2013 and continues to weigh on small and mid-cap counters.
But the industry said that regulations, some of which were in response to the penny meltdown, have made it hard for the market to recover from that hit.
The trading executive said that SGX's removal of its S$600 clearing-fee cap in June has crimped large-volume day trades.
"Now the clearing fee has no cap, so it's very expensive for them to trade," the executive said. "Low liquidity and volumes mean it's also hard for them to trade more, and the bid-ask size is smaller now, so for them to make money from day trading is very hard."
Mr Ho said that proposed rule changes such as the shortening of the settlement period to two days from three days and the requirement for brokerages to collect collateral will suppress the liquidity provided by contra trading. Contra trading refers to the practice of taking and unwinding positions without collateral within the settlement period.
"If you ask for margin, that's operating like a bank," Mr Ho said. "Any exchange doesn't operate this way, because any exchange must combine the speculative and fundamental elements. If you take out the speculative element, the market won't function."
But SGX is adamant that some of those rules being complained about actually improve market quality, and changing them to address what it views as a short-term liquidity downturn would be myopic.
"Yes, from an exchange perspective and from my perspective, I'd like to have higher turnover," chief executive Magnus Bocker said. "But the question is, I'm here to long-term service the investors, I'm here to protect the retail investors and the institutional investors, I'm here to protect the integrity of the market, I'm here to support that we can raise money for companies."
Mr Bocker also argued that although liquidity is thin at the moment, other aspects of the market, such as ease of capital raising for issuers and the costs for investors are still robust. Programmes that incentivise market makers and liquidity providers are also showing early success.
"If you go back and say it's not so good, I would say the three important functions of the equity market work well," Mr Bocker said.
Mr Rochey, who said that he now makes more as a private investor, felt that brokerages should also be more aggressive in incentivising volumes. Graduated takes of commissions, where a remisier's share of commissions is stepped up if the remisier's volume crosses a threshold, should be utilised more, he said.
"If the broking houses want to revive the industry . . . share more of the profit."
The trader said that the market situation is unlikely to improve for the rest of the year. "In two weeks' time, we're into the month of November, and for the European and US funds, this is fund closure time for them . . . The market will get quieter."*
To win back the market share lost to the foreign offshore brokerage firms; the local ones need to revise the current brokerage fee structure. For a daytrader to make a profit of 2-bid on any mid-cap stocks based on brokerage fees @ 0.12% + other charges per order via a CCT account, the reward will be much more attractive if the brokerage fees is lowered to directly compete with those who charge @ S$15 nett per trade size.
An example of a swing-trade on UE (Long, cash a/c):
Mr Loh Hoon Sun, managing director of Phillip Securities, said: "For a broking firm to process a trade, from getting the order, to the dealer keying in and buying the stock for you, getting out the contract, getting payment from the client, getting the shares into their CDP account - it is a long process to get the trade done. “And whether that trade is S$1,000, S$50,000 or S$100,000, it is the same. So there is a fixed cost for doing business or for executing a trade. So we really cannot bring the minimum too low, that it will not cover our cost."
Survival of the fittest — “If you're not good enough, life will kick you in the balls. That's just how things go.” ~~ Wee Shu Min
Reduced board lot size: Some broking firms giving discounts
Industry watchers say commission fees should be adjusted beyond the promotional period, but broking firms note this will squeeze their margins.
By Nicole Tan 22 Jan 2015
SINGAPORE: With Singapore Exchange (SGX) cutting the size of board lots, some broking firms are giving discounts on commission fees for investors trading in fewer than 1,000 shares. Industry watchers have said commission fees should be adjusted beyond the promotional period, but broking firms said this will squeeze their margins.
Broking house Phillip Securities is charging its clients lower commission for online trades, from Jan 19 to Feb 27. This applies to orders of fewer than 1,000 shares and less than S$3,500.
It is among several other firms running promotions, ranging from a 30 per cent rebate off brokerage commission charge or the minimum brokerage commission fee with OCBC Securities, to three free trades with Maybank Kim Eng. As part of its promotions, DBS Vickers has lowered the minimum commission it charges to S$9.88, while over at Lim & Tan, the minimum has been reduced to S$10.
The broking houses are hoping to attract new clients, after SGX reduced the board lot size, from 1,000 shares to 100.
Industry observers said long-term fee adjustments should be considered.
Typically, the minimum commission charged by most broking houses in Singapore is S$25 for online trades and S$40 for offline. Now that the board lot size has been reduced, industry watchers said trading fees too should be adjusted to encourage retail investors to tap new investment opportunities with smaller lots.
Mr Jimmy Ho, president of the Society of Remisiers (Singapore), said: "My view is to go have two tiers with S$2,000 transaction value as a marker. For offline to be reduced, if below S$2,000, to S$20, and for online, S$15. Given the correct pricing structure with no harm on both ends, this initiative can take off."
However, Phillip Securities said that even though the transaction value may be lower, its fixed cost remains unchanged. For example, SGX charges 35 cents per trade, regardless of the value of the trade.
Mr Loh Hoon Sun, managing director of Phillip Securities, said: "For a broking firm to process a trade, from getting the order, to the dealer keying in and buying the stock for you, getting out the contract, getting payment from the client, getting the shares into their CDP account - it is a long process to get the trade done.
“And whether that trade is S$1,000, S$50,000 or S$100,000, it is the same. So there is a fixed cost for doing business or for executing a trade. So we really cannot bring the minimum too low, that it will not cover our cost."
The change in board lot size has just kicked in, and industry watchers said that so far, there has not been a significant increase in new account openings.
Some said more can be done to draw retail investors to the market. Mr David Gerald, president and CEO of Securities Investors Association (Singapore), said: "Brokers and traders need to consider seriously whether they are going to reduce their broking fee for small board lots, encourage their clients to invest more, bring in new clients - they are in a good position to do that.
‘They can also provide professional advisory services, help them to understand the stocks and companies … give them research reports in a very simple way and hold their hand. The small investors need to be assisted that way. And I think that way, they will have confidence and more will come into the market."
SGX said retail participation is now about a third of market volume, down from a high of 45 per cent in 2013.
A privileged protected group of successful people who're extremely scared of losing alittle bit of something, although they already owned plenty.
Not ambitious for higher goal in life or not hungry anymore, extremely satisfied and accustomed to the present situation / possession.
Reluctant to "think out of the box" or take risk to improve doing a job to benefit others, especially the underprivileged people.
To get something done, cannot afford to wait, always request "me first", others last, always complain publicly but seldom make noise at home.
Such complacency extends to many areas of humanity. Well, all will be tested when the shit hits the fan, it's the way of the world. Paper towers will collapse and true mettle will reveal itself. The exciting question is how, and when.
There is a very good writeup on remisiers and their woes in last week's The Edge Singapore. I especially like the comment that if retail investors have a good chance of making money, they will be active in the stock market again. The problem with our stock market now is that it is difficult to make good money and hence, a lot of investors are sidelined. I cannot agree more.
Current trading volumes may just be a mirage given the large volumes churned by the overseas algo traders. Actual trading volumes may be a lot lower as most of us in the markets will realise.
I think when the penny share market wakes up again, money will be made and traders will return. I really don't mind that some of the wild west days can return to stimulate our local stock market back to health.
A nightmare trying to even sell my Malaysian shares
Recently, one of the few Malaysian shares that I had collected a few years earlier had a takeover offer and the shares rose over 30%. I wanted to sell these but realised that the shares were held in one of the Singapore bank backed broker accounts given that we cannot hold Malaysian shares directly in our names. Problem was that this broker account of mine had been deactivated some time back.
I then called the trading representative and after going through all the checks and order details, she told me that she was still unable to sell the shares as I needed to sign an online form with a risk warning statement for overseas listed products. Well, after signing the online form, I need to wait another day for the online form to be acknowledged.
Later that day, I was then asked to download, sign and scan another 2 forms to reactivate my trading account and a declaration form to state that I am not a Malaysian.
The following day, I received an SMS stating they have received my CAR declaration form (yes, yet another form that needed to be filled in) and they have assessed that I do not have the relevant experience/ knowledge to trade in listed SIPs! I think I have to take the SGX online quiz before I am 'qualified'. I then registered for this quiz and found out that to take the quiz for SIPs, one has to go through all the various other quizes first! My goodness.
Finally, out of frustration, I then called the trading rep to sell all the Malaysian shares that I had in that broker account! Fortunately, I don't have any other deactivated broker trading accounts.
If this is the typical process of trading in Malaysian stocks, I really wish our brokers well..... even if there is a sophisticated Asean trading link, the required processes will dampen any enthusiasm.
Yuji Honkawa knew the humans were losing by April 2010, when no matter how fast he sent orders to be filled at the Tokyo Stock Exchange, a machine beat him.
“The winners are the ones who can buy and sell faster than everyone else,” he said. “That core principle is still true in today’s market. The only thing that’s changed is how we do the buying and selling.”
In March we will launch the latest upgrade to our Next Generation trading platform. The upgrade will include:
Guaranteed Stop Loss Orders (GSLOs)* Guaranteed Stop Loss Orders will close out your trades at the exact price you specify, regardless of market volatility or gapping. As with regular stop loss orders, you will be able to add a Guaranteed Stop Loss Order to a trade via the new drop-down menu within the stop loss section of the order ticket as you open your position.
With CMC Markets, GSLOs can be added to existing trades, and modified or removed from a trade at any time.
When you place a GSLO, there will be a GSLO Premium charge, which will appear at the bottom of your order ticket. You can consider this the same as an insurance premium. That said, unlike most insurance premiums, and unlike guaranteed stop costs from most other providers, CMC Markets will refund 50% of the original GSLO Premium if it is not used.**
When using a GSLO the margin requirement will be equal to the total amount at risk, plus 10% in the case of Cash CFD products. This new margin type is called the Prime Margin on our platform.
Inbuilt product search A product search option will be added to the main navigation toolbar, and within certain module headers, including the order ticket, charts, price quote windows, Reuters News, Client Sentiment and Product Overview windows.
Module Linking This new feature will allow you to link two or more modules in the platform together so that when you change the product shown in one, all the linked modules will automatically update to show the same product. By using the new colour-linking option at the top right of each module, you can quickly link your favourite modules to help you analyse the markets. This means that you will be able to link a deal ticket to a chart, the latest Reuters news and Client Sentiment indicators, so that when you update the price all the linked modules will instantly update as well.
New order ticket In line with the launch of Guaranteed Stop Loss Orders, we will make a number of improvements to the layout of our order ticket:
1. Your margin calculation and any costs, including the GSLO Premium, will be shown at the bottom of the order ticket.
2. The Price Ladder will now display within the ticket space rather than over the top of it.
3. The trade type icon in the top right of the order ticket will be replaced by a cancel trade icon and the module linking icon.
If you have any questions or would like more information, please contact us using the contact details below.
*Guaranteed Stop Loss Orders must be placed a set minimum distance away from the current price (known as the GSLO Minimum Distance). This minimum distance will be displayed in the Product Overview and may change during the day, depending on underlying market conditions. GSLOs can only be placed on certain products and during those products’ Trading Hours.
** 50% of the GSLO Premium will be refunded to your account when you remove a GSLO from an open trade, change it to a standard or trailing stop loss order, your take profit order is triggered, or you close an open trade manually (fully or partially).
^ The margin for GSLOs is:
Cash CFD Products
Forward CFD Products
The amount at risk, plus 10% of that amount
The amount at risk
The amount at risk will be calculated as the difference between the current Level 1 price on our platform and the GSLO price set on your position.
After reading the letter “Achieving a robust and vibrant securities market” by Ong Chong Tee of the Monetary Authority of Singapore (BT, June 26), trading representatives (TRs) cannot help but feel that it will be business as usual in the equities market here even with a new CEO at the Singapore Exchange (SGX).
Mr Ong asked whether “Singapore as an international financial centre can afford not to have continuous all-day trading (CAT) as major markets including the US, the UK, Australia and Europe” have CAT. Hong Kong is a major market without CAT. There are also markets with CAT that would not be considered major markets.
CAT facilitates high frequency trading (HFT). When TRs ask for the return of the lunch break, they are not talking about food and networking; they seek a more level playing field for the man in the street. HFT is disruptive, can be destructive and does not contribute to a healthy capital market. It takes no view of company fundamentals and is predatory. Its activities can alter the landscape of individual stocks and real businesses, and hence the market. It can seriously affect portfolio management.
Mr Ong seems to think that many TRs are still living in the Stone Age. TRs do understand how advances in technology have facilitated HFT. In the Stone Age, HFT could have been regarded as creating false markets. Does technology legitimatise these actions?
On another front, SGX constantly emphasises success in its derivatives business in response to criticisms regarding the equities market. In doing so, SGX fails to recognise that promoting derivatives trading does nothing for the building of a real bricks-and- mortar economy.
Derivatives were created for hedging. So it is a means to an end, like insurance, to protect an underlying asset. Used in that respect, they are valuable tools for portfolio management to mitigate risk.
The reality, however, is that derivatives are more often used as an end in itself. The 2008 financial crisis clearly demonstrated this. In this respect, the trading of derivatives is nothing more than betting, thereby amplifying volatility on the underlying asset instead of reducing it.
The stock market needs to return to its original objective of providing an important avenue for companies to raise capital and where trading of stocks reflects real demand and supply. It cannot function as a betting centre.
The facts speak for themselves. Conditions in the Singapore equities market have clearly deteriorated despite many SGX initiatives. Half the stocks in the Straits Times Index are trading at March 2009 to September 2010 levels. Unlike other major markets, many of our stocks have descended to levels not seen since March 2009, the lowest point of the 2008 financial crisis. Fellow TRs and their clients are now driven to other markets for opportunities that they cannot find in the Singapore market.
If our stock market is attractive in the first place, many will queue at our doorstep to list. We need not continue to think of ways and places to go to attract aspirants.