3/13/2013

More transparency in the stock market


I must applaud the move by SGX for improving transparency in the stock market by reporting on the number of short sell positions in each trading session. Though this is not something new as other exchanges have been doing so, it is still a step forward in the name of greater transparency.

Transparency must be good for everyone. For one, investors can have some knowledge of the number of short positions in the stock market the day before. Traders and investors could now have a bit more information on what others are doing and how many stocks are being shorted.

There are two misgivings though. While shortists would have to indicate their short positions, there is no way to know how many of these positions are covered in the same day. Thus the balance open position is still a mystery to the traders and investors looking at the SGX report. The information is at best incomplete or giving a false picture of outstanding short positions. The second misgiving is that the report only comes out the next day, after the trading session is over. So there is really not much that the traders and investors could do except for a little hindsight of what had happened the day after.

Now things would be quite different if one is a big trader or fund that has access to super computers that are plucked into the SGX system. Such computers would not only now able to see how many buyers and sellers of a stock, of every stock in the market, it will now be able to see who is shorting and whether the positions are covered back when shortists have to indicate their sell positions. If only I were to be able to get hold of such a computer to peep into the trading activities in the market, would I therefore be able to capitalise on the sensitive information that the normal traders or small investors would not have and take advantage of it? Would the super computers be telling the big fund managers that such and such a stock has a big short position and not covered, and the fund could then do the necessary to reap an easy profit all because the shortist’s position is now in the open, open knowledge to the super computers only?

If a fund manager is privy to such sensitive information and takes advantage of it, would it be a violation of the stock exchange rulings for insider trading or unfair practices vis a vis other investors and traders? I am not sure how much information the big funds and traders have with their super computers plucked into the SGX system and whether they are really playing an unfair game, playing in an unlevel playing field?

Who knows, or is there anyone out there that can give a clearer picture of what is going on, what is happening, what advantages did the super computers give to their operators? With short selling now in the open in the name of transparency, can there also be more transparency as to the capability of the super computers, what are they doing and what advantages do they have against those trading without super computers?

6 comments:

Anonymous said...

What the govt should do is to legislate that everybody including fund managers declare their short selling positions sorted by stock and updated on a real time basis into the SGX website. That would include all the local and foreign fund managers, eg UOB Asset Mgt, Lion Fund, Morgan, DBS Asset Mgt, Fidelity, Quantum, Soros etc in a separate category, and all the retail investors in another category, sorted by individual stock in alphabetical order.

In the name of transparency we cannot allow big foreign investors to ride roughshod over us, taking advantage of powerless retail investors. Preposterous if SGX allow big boys to plug their supercomputer into their sgx computer. SGX should help to groom local investors. Now they say they want to publish short sell info, I say its too little too late.

With such supercomputer to their advantage, soon all big banks purchase bigger and bigger supercomputers to suck out all the juice from innocent investors. That's why fund managers never ever lose money. Have you seen any fund manager local or foreign lose money ? Never right?

Investor

Chua Chin Leng aka redbean said...

If I rate my articles according to the kopi I received, the quality must be getting bad.

For those who want to buy me kopi and dunno how, just click on the advertisements in the blog are better to flip a few pages.

Thanks for the kopi.

Anonymous said...

just clicked on posb ad, but unsure how many sips of kopi will that translate? :)

Ⓜatilah $ingapura⚠️ said...

redbean:

Be careful what you wish for. If the super computers can give you that information, they'll also be using the same data in their HFT algorithms and programs.

By the time you execute your trade, the HFT's have executed tens of thousands or more trades already.

Better drink plenty of Red Bull ;-)

Chua Chin Leng aka redbean said...

You mean you fail to get my message?

And thanks Anon 11:47. I think it will take several clicks for one cuppa.

Anonymous said...

Can never beat the big boys lah. Just do some home work - buy low, buy something that sells good products, buy something that is profitable, buy something that pays dividend, buy something that has good cashflow.

Somehow those advertisers are mostly exotic women dating sites which I do not like.