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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » A plea for us- SEC urged to restore broker credit

A plea for us- SEC urged to restore broker credit

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Marketinvest

Marketinvest
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
A top investor, fast becoming a whistle-blower in the Colombo stock market, is urging the Securities & Exchange Commission of Sri Lanka (SEC) to restore broker credit to investors.
“In all humility, I would emphasize the crying need in the CSE (Colombo Stock Exchange), to level the playing field, by restoring the traditional system of broker credit (50% of the client’s portfolio value) with necessary safeguards. The brokers can allocate credit judiciously,” said K C Vignarajah, former chairman of the Ceylon National Chamber of Industries in a letter to SEC Chairperson Indrani Sugathadasa.
Mr Vignarajah, who says he is acting in the public interest and of independent shareholders of listed companies, said even banks, finance companies and other lending institutions lend much greater proportions on less readily recoverable assets like real estate, vehicles, and pledged perishable goods (Pramuka Bank carried a substantial quantum of expired foodstuffs).
He said the relaxation of ‘T+5 to T+15’ (due to investors’ personal difficulties, like hospitalization, local and foreign travel, etc) is also desiredwithin the overall credit limit, by battered investors.
He said many investors firmly believe that the SEC and CSE have been partial(or had turned a blind eye) to large scale manipulators and insider traders, who have openly and brazenly amassed huge piles of ill gotten cash, here and abroad, by ‘taking advantage of the current lax regulatory frameworks, which taken together with tight credit restrictions have ruthlessly crushed the average decent shareholders’. “These investors say they have been ruined by insider traders, manipulators, by T+5 forced selling, and the credit restrictions, acting in concert,” he said, adding that they had earlier been trading, sedately using the traditional lines of credit extended by the broker of 50% of thevalue of their portfolio.
The SEC has said that that some brokers had abused the credit systemby extending to speculators credit as high as 300% and the punitive measures were needed. However, this justification no longer exists, Mr Vignarajah argues.
“Tremendous damage has already been done to the honest, independent, small, medium and large shareholders. Hence the intemperate language and unusual anger expressed by affected small and large investors,” he said.
The country is facing great challengesin many spheres due to various acts of commission and omission. It is a sad reflection that the busi.patronizing advice by some interested parties, analysts and fund managers to divert investment to unit trusts. Some unit trusts and funds are remote controlled by large networks of related parties and conglomerates, which use the public’s monies to build up stakes in companies for their own ends, he said.
“They are not necessarily managed inthe interests of the unit trust holders and fund investors, but are allegedly used to move the markets and shareholdings of certain companies for the ulterior purposes of the controlling interests (CIs). In this context, until appropriate regulatory mechanisms are in place to control such malpractices and conflicting interests, the average innocent investor should.

Genting


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Mr Vignarajah, thank you!!

CHASE

CHASE
Manager - Equity Analytics
Manager - Equity Analytics
Thanks for the news. It's good to have broker credit but relaxation of T+5 to T+15 will be another stupid move & It'll hurt again on small investors. Evil or Very Mad

insidertrader


Manager - Equity Analytics
Manager - Equity Analytics
Broker credit appeal is a coverup for a declining market. It has always been the case.

rijayasooriya

rijayasooriya
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Thumbs up for Mr.Vignarajah Exclamation

windi5

windi5
Moderator
Moderator
Something is better than nothing So we all should welcome at least T-15.

Gainer

Gainer
Associate Director - Equity Analytics
Associate Director - Equity Analytics
both are same problem

insidertrader


Manager - Equity Analytics
Manager - Equity Analytics
Retail players will play the casino for short while. If they win they'll get the fraction of the amount after deducting broker charges and interest and late fees and so on and on and major share of the winnings will go to brokers. If they lose they'll lose their money and major share of the winnings will go to brokers. It's a win win situation for brokers.

And you know what. Broker credit is already there.

CHASE

CHASE
Manager - Equity Analytics
Manager - Equity Analytics
@ Windi/rijayasooriya
you guys happy with T+15. for me it's a most stupid decision. I don't feel Mr. Vignarajah Acting in the public interest. he may acting for manipulators & other big guys who make us fools. current mkt situation is not due to previous broker credit. It's mainly because of T+5
I bet you guys we'll have worst situation if T+5 change to T+15. best solution for now is broker credit. at lease we can survive...

StocksWatch


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@windi5 wrote:Something is better than nothing So we all should welcome at least T-15.

Yeah...good for the first 15 days, isn't it??

windi5

windi5
Moderator
Moderator
If you play wisely,T-15 will be more than enough. Very Happy

StocksWatch


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@windi5 wrote:If you play wisely,T-15 will be more than enough. Very Happy

Like how, can you please elaborate?

windi5

windi5
Moderator
Moderator
15 days to settle credit obtain from brokers, its a half a month. so wisely select shares you buy using credits,it will surely bear fruits. Instead of having nothing, its a better to have a half a month of credits.

limestone

limestone
Manager - Equity Analytics
Manager - Equity Analytics
please read this article in todays (14/8/2011)Island you can see the other side of this broker credit issue.
http://island.lk/index.php?page_cat=news-section&page=news-section&code_title=69



Last edited by limestone on Sun Aug 14, 2011 3:48 pm; edited 1 time in total (Reason for editing : typo)

StocksWatch


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@windi5 wrote:15 days to settle credit obtain from brokers, its a half a month. so wisely select shares you buy using credits,it will surely bear fruits. Instead of having nothing, its a better to have a half a month of credits.

No its not nothing, you have 5 days now to clear your credit. If it is T+15, then you get additional 10 days and glad to know that in your opinion this additional 10 days can make a difference.

But mark my words friend, if this T+5 is replaced with T+15, It will not take too long for the people to start mourning again about the same issue. You only need the market to fall couple of weeks and then everyday thereafter will become a forced selling day for brokers!!!

windi5

windi5
Moderator
Moderator
Credit limit makes investors more cautious and wise in their selection of shares, rather than going after manipulated rallies.Traders who do monkey type tradings always make their fingers burn. For me 15 days is more than enough to deal with good shares and settle back the credits.This make me study more about shares before i buy them and will make me think twice before going after craps rallies. Limitless credit might make a so called bubble in the mkt,bubble burst will be a big strategy than credit clearing on time.

CHASE

CHASE
Manager - Equity Analytics
Manager - Equity Analytics
@windi5 wrote:Credit limit makes investors more cautious and wise in their selection of shares, rather than going after manipulated rallies.Traders who do monkey type tradings always make their fingers burn. For me 15 days is more than enough to deal with good shares and settle back the credits.This make me study more about shares before i buy them and will make me think twice before going after craps rallies. Limitless credit might make a so called bubble in the mkt,bubble burst will be a big strategy than credit clearing on time.

Credit bubble will create from the T+15 not by the Broker credit. May be you will play with your knowledge but it's short term. Most of will burnt their figures more than they do now. only Big guys will gain & experts can survive.

If some one know please let me know how much market on credit due T+5 (it should be huge)?.then every body can get an Idea about T+15.
I think best option for small investors is broker credit up to 50% from PF at a reasonable interest. Broker should settle the by next day of the purchase T+1. If investor bought without money, then he need to pay interest from the first day. by this way it'll create a strong mkt on Cash.
Anyway I believe SEC wont extend T+5 & they'll allow broker credit soon.
if any-case if they allow T+15 it'll be a end of CSE as a Invest. it may survive as place of Gambling Very Happy

StocksWatch


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@windi5 wrote:Credit limit makes investors more cautious and wise in their selection of shares, rather than going after manipulated rallies.Traders who do monkey type tradings always make their fingers burn. For me 15 days is more than enough to deal with good shares and settle back the credits.This make me study more about shares before i buy them and will make me think twice before going after craps rallies. Limitless credit might make a so called bubble in the mkt,bubble burst will be a big strategy than credit clearing on time.

If T+15 makes you more cautious and wise in selection of your shares, the current T+5 should have made you and others even more wiser, then why it should be changed?

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@windi5 wrote:Credit limit makes investors more cautious and wise in their selection of shares, rather than going after manipulated rallies.Traders who do monkey type tradings always make their fingers burn. For me 15 days is more than enough to deal with good shares and settle back the credits.This make me study more about shares before i buy them and will make me think twice before going after craps rallies.

What...!!!!

Success in trading is not every tom dick and harry can do.
Come on.. Good shares does NOT always give you good results in tradings. NOOOOO

Again...tradings does not always end up in win-win situation.



Last edited by UKboy on Sun Aug 14, 2011 10:15 pm; edited 1 time in total

windi5

windi5
Moderator
Moderator
Hikz. 5 days mean nothing brother.its a only a week.you have to sell on Friday what you bought on Monday,In T-15 you can hold on till next Friday. does it look good?.Any way we cant expect some thing big from SEC,might be a merely extension of days of Credit granted. So instead of scolding every one why we shouldn't use to the system,its fair for every one.

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