Tuesday, April 03, 2007
Dear Yus-Baby, How Now Brown Cow?
Probably your wife doesn't even call you something that endearing. If you do not already read this blog, ... won't blame you considering the amount of tongue-lashings I have been meting out towards you/Bursa. If you need refreshening, please run through my arguments on: what's lacking with Bursa; why I still like the share price; why Short-selling will fail dismally; ... remember the Single Stock Futures (remember the Alamo) ... hmmm...
Let's be constructive and make your stock options even more valuable. Market velocity is up. Instead of spending months coming up with a flawed business model pertaining to Restricted Short Selling in an illiquid market such as ours, you can drum up a lot more market participation by implementing the following two measures:
a) Allow and encourage brokers to start issuing PUT covered warrants. Same as the present covered warrants (calls) just the reverse in betting. Its akin to shorting, and a whole lot cheaper. Just maybe get the houses to extend the time to expiry a bit more to ensure better reception, 9 months is way too short, maybe 15 months is better. Put warrants can be transacted with one phone call and completed in 5-15 seconds. Everyone should compare that with shorting a stock, just go through the logistics, time and then tabulate the costs involved. Who will go for RSS???
Some will argue that put warrants may not have a deep enough market; hey, the same argument will apply for Short Selling. No one can guarantee that there will be sufficient stock to sell short, I am sure Bursa will not be able to offer any form of guarantee or liquidity.
Or you can introduce Put warrants alongside Short Selling, but then it could be really embarressing when RSS fails dismally next to put warrants, so you don't want to have that, ... rather you want to introduce a more cumbersome instrument with dubious liquidity that will cost more to everyone so that Bursa can be the gatekeeper (one Eric Tsang is enough-already) and rake more fees - but remember... no transaction, no fees, Yus-baby, no matter how many "toll gates" you set up.
b) Another way to boost volume by 20% is to allow all clients/remisiers/dealers to short stocks or warrants provided they cover within same day. Right now, this is not allowed, please tell me why??? Same day trades should be allowed whether they have shares or not. Of course if a client shorts a stock and failed to cover, he/she will get the same buy in penalty, which will be deterrent enough. By allowing this, it will attract more day traders, and in fact create a more liquid market place especially when investors get pissed off over a syndicated stock rising too much. It will equalise the market place more for the small punters. Right now, its the big fish and syndicates that move stocks up and down. Small punters can only follow the trends and waves after it has bolted. This way, small punters can short first cover later, which automatically DOUBLES his/her options in buying/selling stocks now/later. Its a very good move, please take up my suggestion and remember to credit me, but no need to nominate me for some Datukship or anything... Ok-baby ... berkhidmat untuk negara ..!