Light Travels Faster Than Sound - My Reaction to the Response of the Philippine Stock Exchange COO against the article, "The Dark Side", which appeared in Phil Equity Column in the Philippine Star of April 14, 2014.
This article relates to the Philippine Stock Exchange (PSE) controversial plan dispense with post-trade broker identity. This measure would result in the Exchange adopting total brokers' anonymity. Many believe that such a move would compromise transparency, market integrity and market quality. My personal conviction is not much serious thought has been given to the serious impact of such a move on the various stakeholders. I am particularly concern that such a move will lead to the creation of "dark pools" which may lead to the market being rigged in favor of the "big boys" (the Institutional Investors and the more informed investors) at the expense of the not-so-well informed retail or small investors. This "rigging of the market" is not something speculative but has been observed to occur in both the US and EU Exchanges in the aftermath of the stock and financial crisis of 2008/2009. And since then, both the US and EU Exchanges has taken measures to address the challenge pose by the existence of "Dark Pools", Such new measures include restricting transactions in 'dark pools'. I am thus amuse that while the major Exchanges in US and Europe are tightening rules on anonymous trade from dark pools, the PSE is opening the floodgates for the creation of 'dark pools' by adopting completely an anonymous trading regime. Here are my thoughts on why the PSE should not rush into such a plan and instead take time to listen to market participants, especially retail investors who most lightly will be impacted by such a move. The mere fact that these investors are often the least informed puts them particularly vulnerable to various market manipulations which might take place under a cover of "darkness" that anonymous trading bring. I hope this short reaction of mine will stimulate an intelligent discussion on the proposed plan of the PSE hasten to hasten the removal of post-trade "broker identifiers". At the very least, it is my hope that PSE will revisit its plan such that it will preserve whatever that has been done over the years in promoting stock investing to young Filipinos and Oversea Filipino Workers (OFW) towards building a strong and sound capital market in the Philippines.
This article relates to the Philippine Stock Exchange (PSE) controversial plan dispense with post-trade broker identity. This measure would result in the Exchange adopting total brokers' anonymity. Many believe that such a move would compromise transparency, market integrity and market quality. My personal conviction is not much serious thought has been given to the serious impact of such a move on the various stakeholders. I am particularly concern that such a move will lead to the creation of "dark pools" which may lead to the market being rigged in favor of the "big boys" (the Institutional Investors and the more informed investors) at the expense of the not-so-well informed retail or small investors. This "rigging of the market" is not something speculative but has been observed to occur in both the US and EU Exchanges in the aftermath of the stock and financial crisis of 2008/2009. And since then, both the US and EU Exchanges has taken measures to address the challenge pose by the existence of "Dark Pools", Such new measures include restricting transactions in 'dark pools'. I am thus amuse that while the major Exchanges in US and Europe are tightening rules on anonymous trade from dark pools, the PSE is opening the floodgates for the creation of 'dark pools' by adopting completely an anonymous trading regime. Here are my thoughts on why the PSE should not rush into such a plan and instead take time to listen to market participants, especially retail investors who most lightly will be impacted by such a move. The mere fact that these investors are often the least informed puts them particularly vulnerable to various market manipulations which might take place under a cover of "darkness" that anonymous trading bring. I hope this short reaction of mine will stimulate an intelligent discussion on the proposed plan of the PSE hasten to hasten the removal of post-trade "broker identifiers". At the very least, it is my hope that PSE will revisit its plan such that it will preserve whatever that has been done over the years in promoting stock investing to young Filipinos and Oversea Filipino Workers (OFW) towards building a strong and sound capital market in the Philippines.
Light Travels Faster Than Sound - My Reaction to the Response of the Philippine Stock Exchange COO against the article, "The Dark Side", which appeared in Phil Equity Column in the Philippine Star of April 14, 2014.
This article relates to the Philippine Stock Exchange (PSE) controversial plan dispense with post-trade broker identity. This measure would result in the Exchange adopting total brokers' anonymity. Many believe that such a move would compromise transparency, market integrity and market quality. My personal conviction is not much serious thought has been given to the serious impact of such a move on the various stakeholders. I am particularly concern that such a move will lead to the creation of "dark pools" which may lead to the market being rigged in favor of the "big boys" (the Institutional Investors and the more informed investors) at the expense of the not-so-well informed retail or small investors. This "rigging of the market" is not something speculative but has been observed to occur in both the US and EU Exchanges in the aftermath of the stock and financial crisis of 2008/2009. And since then, both the US and EU Exchanges has taken measures to address the challenge pose by the existence of "Dark Pools", Such new measures include restricting transactions in 'dark pools'. I am thus amuse that while the major Exchanges in US and Europe are tightening rules on anonymous trade from dark pools, the PSE is opening the floodgates for the creation of 'dark pools' by adopting completely an anonymous trading regime. Here are my thoughts on why the PSE should not rush into such a plan and instead take time to listen to market participants, especially retail investors who most lightly will be impacted by such a move. The mere fact that these investors are often the least informed puts them particularly vulnerable to various market manipulations which might take place under a cover of "darkness" that anonymous trading bring. I hope this short reaction of mine will stimulate an intelligent discussion on the proposed plan of the PSE hasten to hasten the removal of post-trade "broker identifiers". At the very least, it is my hope that PSE will revisit its plan such that it will preserve whatever that has been done over the years in promoting stock investing to young Filipinos and Oversea Filipino Workers (OFW) towards building a strong and sound capital market in the Philippines.
bright before you hear them speak" (Humorous Quote by Steven Wright). I am using this quote to illustrate this one classic example of 'when regulators know not what they are doing'. And instead of shedding light, they bring forth a worst kind of darkness. They try to defend something that they don't comprehend. They repeal rules without really understanding the circumstances that brought about these rules in the first place. While they claim to fight for transparency, market integrity and market quality, their actions do the reverse by restricting market surveillance to one entity or body. In defending their untenable position, they cite as reason something to this effect, wit: "Studies have shown blah...blah" to support their position without citing the specific studies. We know that whenever someone uses that kind argument, he or she is engaging in deception, pure and simple. If indeed that there are studies which support their position, why are they afraid to reveal these studies so that a proper, objective and intelligent review of these studies can be made. Thus, a comparison can be made with studies that yield contrary findings. With regards to the issue at hand, I can cite specific studies to show that market quality measures such as confidence, liquidity and efficiency improves in trading regime when counterparty identities are known. And one such study is that of the Korean Stock Exchange - a study titled "Shining a Spotlight on the Counterparty Identity in the World's Best Lit Market", by Thu Phuong Pham, Peter L. Swam and Joakim Westerholm. Another earlier study titled "Effects on Fragmentation and Market Quality When ASX Moves Towards A More Anonymous Market" done at the University of Sydney, also shows that market quality suffers in an anonymous trading regime. The truth and fact of the matter is that after the stock and financial crisis in the US in 2008/2009, there are now measures to move against anonymous trading in 'dark pools'. Similarly, the EU is also looking at measures to curb anonymous trading and by its nature the manipulation of markets. I am thus amused that while other countries/exchanges are closing in on 'dark' pools, the PSE is opening the floodgates for the creation of 'dark pools'. It is interesting to note that the London Stock Exchange is looking at a measured step to limit transactions within the 'dark pool' (anonymous trading platform) by capping it to a max of 10%, with any excess to be executed via an auction system. It is an accepted fact that there is information asymmetry in the market and that informed traders benefits from a broker anonymity regime as compared to non-informed traders and that in exchanges in UK where there is a choice for traders to select between a anonymous market and a non- anonymous trading platform, informed traders tend to migrate to the earlier platform. This has created market aberration that this 10% limit is now being considered to address this challenge. I am also taken aback by the abuse of the word "best practice" in describing 'broker anonymity' in this article. If best practice is taken to mean a commercial practice that is prescribed and accepted as correct or effective, then certainly this 'broken' broker anonymity practice which both the US and EU exchanges are working to fix will not qualify. By the way, the reason why most of the Exchanges in the US and the EU adopted 'broker anonymity' is not because of the inherent goodness of the system. The adoption was basically driven by competition among them. I am equally stunned by the over-emphasis of liquidity as a measure of market effectiveness in the light of the claim that "ensuring the integrity of the market is at the core of the functions of the Exchange" in this article. Liquidity and transparency are not mutually inclusive as there is such a thing as 'dark liquidity' which is basically liquidity for the 'big boys' (read the 'more informed') at the expense of the small investor (read the 'less informed') and liquidity for those who can (and if they want to) front-run or fix prices. Let me just end this brief with an explanation on the logic of the current practice in which pre-trade orders posted at the PSE or other similar exchanges do not show brokers identifiers but while post-trade orders which have been matched shows both the buyer and seller. There are two primary reasons behind this arrangement. Firstly, this is meant to be a check and balance against any collusion between the buyer and seller. Second, as I have mentioned earlier since there exist asymmetry in information in the market, the post-trade identity of buyers and sellers compensate those less informed traders by giving them information on what is happening who is buying and selling that can serve as a guide in their trading decision. Certainly, the intent was never to create a herding mentality when this arrangement was first conceptualized.
Caveat: This comment reflects my personal view and does not reflect the stand of any of the organizations that I am affiliated. The intent of this short brief is to tease, 'disturb the mind' and stimulate discussion among market participants and the investing public.
R.A. 6426, The Foreign Currency Deposit Law in The Philippines Which Raissa Katrina Marie G. Ballesteros Violated in Disclosing Khoo Boo Boon, HSBC Philippines Premier Client's US Dollar Deposit
Violation of Bank Secrecy Law (R.A. 1405) and Foreign Currency Deposit Law (R.A 6426), and violation of his right to privacy and the trust between a bank with its depositors - A simple case of "gross ignorance of the law" or "Crass Stupidity"? Letter of Reply of Atty. Raissa Katrina Marie G. Ballesteros to Khoo Boo Boon when HSBC and she, a Compliance and Legal Counsel of the Bank, goofed in disclosing details of Khoo Boo Boon's Peso and US Dollar Deposit without his consent.
"When an agent of the justice system mandated to protect you aided and abetted the perpetrator of the crime. Khoo Boo Boon vs Raissa Katrina Marie G. Ballesteros, Legal Counsel and Compliance Officer HSBC, Philippines.
Violation of Bank Secrecy Laws of The Philippines - One Extremely Thorough Investigation by The Central Bank of The Philippines (Bangko Sentral NG Pilipinas)
Light Travels Faster Than Sound - My Reaction to the Response of the Philippine Stock Exchange COO against the article, "The Dark Side", which appeared in Phil Equity Column in the Philippine Star of April 14, 2014.