How to Trade Shares or Stocks in Bursa Malaysia

In our last post about Bursa new trading system called BTS or Bursa Trade Securities, we informed that there are much more transparent methods of calculating the opening and closing price. Today we will look at what it means.

There are two trading session per day.

(a) Morning trading session

8.30am to 9.00am - pre opening
9.00am - opening
9.00am to 12.15pm - continuous trading
12.15am to 12.20pm - pre closing
12.20pm - closing
12.20pm to 12.30pm - trading at last

Bursa Morning Trading Session

(b) Afternoon trading session

2.00pm to 2.30pm - pre opening
2.30pm - opening
2.30pm to 4.45pm - continuous trading
4.45pm to 4.50pm - pre closing
4.50pm - closing
4.50pm to 5.00pm - trading at last

Bursa Afternoon Trading Session

As you can see from the above there are TWO pre-opening and TWO pre-closing period.  During these period, the BTS system will find the best opening or closing price based on a set of algorithm. During these two periods there will not be any matching done. Dealer’s representative can only input their buy or sell order during these two periods.

Once the opening price has been decided, that will be the Opening price. Same goes with the closing price. However there is a difference for the closing price. You will notice that there is period called Trading-At-Last for both the morning and afternoon session. During Trading-At-Last period there will not be any movement of the price. The price is fixed at the closing price and customers can be sure that he/she will get the same price as the closing price during this period. This period is also for institutional clients to close their position at a fixed price rather the current trading system whereby someone can manipulate the price by keying a market buy or sell to change the closing price up or down drastically.

In the next Pro Trade Shares posting, we will explain the algorithm involved in the deciding the matching price in BTS.

Bursa Malaysia new trading system (also known in the industry as BTS or Bursa Trade Securities) will go live on 1st December 2008.

Pro Trade Shares was informed that Bursa did the last familiarity testing last week on 15 November 2008. All stockbrokers have received circulars for any contigencies whereby Bursa will revert to SCORE if on the first day of trading if BTS goes down. Pro Trade Shares will present a series of posts to explain what are the changes involved with the new Bursa Trading System.

Basically, Bursa is changing its trading and matching system. The feel and look of the screen with brokers BFE (broker front end) will not be drastically changed. However there will be some additional information presented. Over the last 2 years all remisiers or dealer representatives has been told to upgrade their PC to use Windows XP with specific monitor resolution in order to display the additional informations in their BFE.

For this posts I will briefly explain the differences between the existing (and soon to be referred to as the old system) and the BTS.

Present system:
Order Matching : 10 seconds interval (yes that long!)
Pre-opening price : Not predictable or Non transparent
Closing price : Uncertain, can be manipulated and its the last done price
Order type : Only has market order and limit order type
Best price : show 3 best price for buy and sell order

BTS
Order matching : REAL TIME !
Pre-opening price : predictable / transparent (there is a formula)
Closing price : predictable / trading at last
Order type : more order types
Best price : 5 best price

As you can see above, there are some differences. The first is the matching time. Many people don’t know that the matching time is 10 second interval. Some people’s order will take the maximum 10 second if his/her dealer’s representatives key-in the order immediately after the last matching was done. Some people will see their order matched immediately if the dealer’s representative (DR) input their order 1 second before the matching interval. With BTS your order can match immediately if there is a corresponding seller or buyer at your requested price. That’s the Pro.

The Con is that in the current old system, you can still amend or cancel your order from the queue if you changed your mind but with BTS, your order might be matched before you can even pick up your phone to call your DR to amend or cancel your order.

The current algorithm for pre-opening will give unpredictable opening price of the counters and the current system also allow manipulation of the last done price (ie. the closing price). A good trader can easily ‘force’ a higher or lower closing price by taking the buyer or seller price.

In the next few postings Pro Trade Shares will explain how the mechanism of deciding the pre-opening and trading at last price so either subscribe to my RSS or visit us regularly for the updates.