Friday, February 02, 2007

RSS/SBL, Same Smell

Bullshit - The word "bullshit" is most often applied adjectivally to deprecate a statement or an action. Bullshit (as a culturally based activity) commonly occurs in situations where truth and accuracy are far less important than the ability to achieve a suitable response in the audience. In many cases, such a response helps to gain popularity or favor (often needed in politics, religion or advertising). More mundane examples of bullshit often involve the lives of ordinary people. For example, it is not at all uncommon to hear of people "bullshitting" a job interview, or attributing their performance in an examination to their ability to bullshit. In this sense, bullshitting walks the line between extemporaneous speaking and lying outright. It is also common for people to bullshit friends or acquaintances, by spinning an elaborate tall tale. The object here is to make the bullshittees look foolish by dint of their gullibility in accepting the bullshit as fact. Bullshit does not necessarily have to be a complete fabrication; with only basic knowledge about a topic, bullshit is often used to make the audience believe that one knows far more about the topic by feigning total certainty or making probable predictions. It may also merely be "filler" or nonsense that, by virtue of its style or wording, gives the impression that it actually means something. To discourse upon the contexts, frames of reference and points of observation which would determine the origin, nature, and meaning of data if one had any. To present evidence of an understanding of form in the hope that the reader may be deceived into supposing a familiarity with content.

Don't really know why they postponed introducing RSS (short selling) for KLSE listed stocks? Because the bloody end result is and will be the same... I thought that they may tweak the structure and hence the postponement... but its the same load...

As reported in The Star today: "Since the launch of RSS and SBL, only 62,500 Bursa Malaysia listed shares have been lent out to the short-selling pool. So far, there are no takers.

Short-selling is not without risks and the regulators are mindful of this. The framework for RSS and SBL comes with rules and regulations (hence “regulated”) to prevent abuse by speculators aiming to depress share prices and the broader market. The authorities are obviously treading carefully, delaying the launch of RSS more than once since Bursa announced in March 2006 its intention to reintroduce it.

While the rules are intended to prevent abuse, they inadvertently tend to be prohibitive, too. Due to the many conditions, the timeliness of trades may be compromised. For example, to initiate a short-sell, the borrower checks the availability of the securities with the dealer at the borrowing agent who forwards the request to its SBL desk. The SBL desk would verify the borrower’s collateral and submit the borrowing request to Bursa Clearing, which acts as the central lending agent (CLA). The CLA will match the request with the lending pool and allocate the securities and confirm the match with the borrowing agent’s SBL desk, which then notifies the dealer, who informs the borrower. The borrower can then place the RSS order.

Typically, one would prefer to short on the spot to maximise returns. Having to go through many steps and parties may cause the short seller to lose precious minutes and profit. AmSecurities Sdn Bhd and HSBC Bank Malaysia Bhd are the two approved lending agents. AmSecurities is also the sole approved borrowing agent. The rigid rules complicate short-selling and puts off those unfamiliar with it. With a clear understanding of the process, even those with shares to lend out may be unwilling to do so for a mere less than 2% return. As investors familiarise themselves and Bursa relaxes the rules, perhaps investor interest will eventually emerge, especially when the bear returns.

as posted on 11th October 2006 ...

Regulated Short Selling Will Fail Dismally (Again)

Bursa will not like to hear me on this. They'd probably think I have a deep vendetta against them. First, Bursa is too greedy to try and act as the Central Lending Agency. Brokers, custodians and investors all have to go through Bursa to things done. This creates an unecessary layer which adds to cost.

Secondly, Bursa failed to appreciate why an OTC market would have been better. Not all lenders want to lend shares at 2%, some may only lend at 5% or even 10%. Take Google shares for example, at US$500, probably a lot of people would want to short it, hence the lenders could actually ask for a higher rate before lending out. A transparent and free-market OTC makes for real activity and better returns for both sides. I am not sure if Bursa even have the mechanism to change the lending rates?? (..what, change the rates... every now and then ... so much work la...).

Thirdly, too much red tape, inteference, scrutiny... blah blah... Having said that, as long as people can make big money, they can withstand the trouble to invest, if they can make 30% in a month in Timbuktu exchange, you can betcha they will try to get there. But it probably won't happen in Bursa's RSS - limited shares for shorting, do you think there will be 1 million of a company's shares for shorting? Chances are, it will be sporadic and insignificant, which will turn people off. That is why an OTC would have stood a better chance to survive. Imagine the current scenario, with Genting jumping on the Macau news, I think its a good time to short Genting shares, but no one wants to lend at 2%, so I put up a willingness to borrow 50,000 shares at 4% or even 6%, I am sure someone will bite. The failure to allow for a free flowing capital markets.

The shallow thinking that by being the Central Lending Agency, somehow that could prevent disasters needs to be re-examined. You mean, the 1997 implosion was due to short sellers??? Please grow up, that shows how naive the current crop of people in unthinkably high positions are... sigh... You cannot molly-coddle a capital market, it has to be relatively laissez-faire ... look at global best practices... please...

p/s btw, I totally agree there should be short selling, just do it better ... man...

1 comment:

the ultrabeast said...

Wow, you came up with that definition for *BS* ? That exposition should be included as a Wikipedia entry.