How to Trade Shares or Stocks in Bursa Malaysia

Is there a minimum number of stocks for Purchase or Sales in Bursa Malaysia?

ProTradeShares will share with you what is the practice currently (as at 1 October 2008).

In Malaysia, the stocks or shares traded is done on per ‘LOT’ basis just like in many other countries. In Malaysia, One (1) Lot is equivalent to 100 units of shares. Therefore the minimum number of shares or stocks one can buy or sell in Bursa is 100 units of shares.

Any purchase or sales other than the 100 units is known as ‘ODD LOT’.

Bursa current system allow the quotes outside the equity trading system for the purchase or sale of Odd lot but the contract are matched on a ‘All or Nothing’ basis. It means for Odd Lot, if there is a seller trying to sell 7 units of shares and there is a buyer trying to buy 3 units of shares, the contract will not be matched. Only when there is a buyer willing to buy the 7 units of shares, the seller contract will be matched and done. The Odd Lot system is not part of the equity trading system therefore it doesn’t follow the normal price limit convention.

For example:

In Bursa Equity trading system, a counter A is currently being traded at RM1.00. In the Odd Lot screen, a seller can quote an Odd Lot price of RM20 for the sale of 10 units of shares. Its upto the buyer whether one is willing to pay for the price. And due to the current minimum brokerage of RM40 per contract, quoting the same price as Bursa Equity trading system, of RM1.00 in this example, will results in the buyer and selling paying more for the brokerages than for the actual stocks.

Let us come back to the current minimum quantity of 100 units of shares.

Not too long ago, One Lot was equivalent to 1,000 units of shares. That was when the stocks prices in Bursa were higher. Now a 100 units of shares could also end up having the minimum brokerage being higher than the 100 units of shares itself.

For example:

A counter B is being traded at RM0.20. If one is to buy 100 units of counter B at RM0.20 (or 20sen), the gross contract value is RM20 (100 units shares x 20sen). This is much lower than the minimum brokerage of RM40. In this scenario, the seller will end up with a “negative” sales contract. It means that the seller have to PAY for selling! So better be careful when one want to sell stocks that are currently traded below RM0.50 or below 50sen.

In Part 1of my HOW TO START TRADING series, I have explained how to open a CDS and Trading Account.

Are you confused yet? I hope not as this are just the basics. I haven’t gone into the more complicated products and processes involved in the trading of shares.

Part 2 of my series will take you through the basic terms used in the buying and selling of shares in Bursa Malaysia.

BUY STOCKS

Obviously if you have just opened a Trading Account you will need to buy shares before you can sell shares!

Note: Actually you can Sell shares before you buy the particular shares which can be done under the Securities Borrowing and Lending (”SBL”) method but that will be further explain in my future postings.

You start by calling your DR to give your order. What happen after you have given your order is that your DR will key-in or
input into his system which is called Broker Front End (”BFE”) system . He will key-in to buy Y number of stock at RMX.00 for A share. The order will be send electronically to Bursa (ie. the exchange) computer system. The Bursa system will then check whether there is any seller at the price of RMX.00. If there is no seller at that price your order will be put in ‘queue’ until there is a seller or the system match your order based on a certain algorithm to give you the best price which is either at RMX.00 or lower.

After matching your remisier will see the matched quantity at the matched price in his BFE. He is suppose to call you by end of the day to tell you that your order is matched. According to Bursa on the day your order is matched, is called “T day”. You must remember that Brokers and DRs will always use the term “T” for trading.

Note: Most of the time I will use Brokers to refer to PO (Participating Organisations or Stockbroking companies).

You are suppose to get your contract note after T day. If your mail man is efficient then you will get the contract note on T+2. T+2 means 2 working days after T day.

Note: To the Brokers, working day is equivalent to Bursa trading days which are Mondays to Fridays. If Wednesday is a public holiday, than there is only 4 trading days in the week otherwise there will be 5 trading days in a week. If you buy on a Friday then your T day is Friday and T+1 is a Monday, T+2 is Tuesday and T+3 is Wednesday, assuming there is no public holiday.

Note: Public holidays also refer to Bursa declared holiday. There have been occasion in the past that Bursa announced a holiday on a non public holiday so you will have to be aware of such things. Such announcement will be publish in most major Malaysian newspaper and Bursa website.

When you buy, you are suppose to pay, right?. So when do you pay?.

According to Bursa rules, a buyer is supposed to pay by 12.30pm on T+3 to the Brokers. If payment is not received by the Brokers, the Broker have the right to sell your unpaid shares on T+4 morning at any price they like. Sometimes you might not receive you contract note by T+3 so you will have to ask your DR for the your contract details. Your DR is supposed to monitor for you but if your DR is busy, he could forget to remind you. So it is better for you to monitor your own trades. After you have paid for the shares, in your next MCD statement you will see the crediting of the shares that you have bought. If you buy, there will be a credit of shares. If you sell, there will be a debit of the shares.

SELLING STOCKS AND CONTRA

If you are a mid to long term investor, you would probably would have make the payment for your purchase before or by T+3. If you sell your stock after you have made your payment, Bursa rules states that the Brokers must issue payment to you the latest by T+3 at 12.30pm. Most Brokers in Malaysia will have the sales check ready on T+3 before 12.30pm for collection at their counters. Most people will request their DR to collect the check on their behalf and to bank in the check for them.

The order process is the same as when you buy. Your sell order will be routed to the exchange system and the Bursa algorithm will match your sell order at you request price or better.

However, please make sure that you have the particular stock in your CDS account before the end of the trading day on T+2 if you have made the sale. MCD will check your CDS account for the stock you sold to be debited at end of the trading day on T+2. You are allowed to transfer stock from another CDS account with another Brokers upto 4pm on T+2.

Note: In Malaysia you are allowed to open another CDS and trading account with different Brokers. So if you want to open 10 CDS accounts and 10 Trading accounts with 10 different brokers, you can but I don’t know why you want to do that.
You can also open a CDS account without a Trading account but not the other way around.

If by midnight on T+2 you don’t have any shares in your CDS account, Bursa will institute a ‘Buy-in’ on your account.

Note: A Buy-in means Bursa will offer to buy from the open market your specific counter for the same quantity of shares that you can’t deliver at 10bits higher then the last closing price. Below is the bids table for different closing price.

After the Buy-in you will receive a contra for your sales. A contra is the setting off between the unpaind buy and sell contract.

Brokers will set-off or nett-off the value of the sales contract against the value of the buy contract. If your sales contract value is higher than your buy contract value, it is called Contra GAIN. If your sales contract value is lower than your buy contract value, it is called Contra LOSS. Therefore a Buy-in can result in a Contra Gain or a Contra Loss depends on the direction the share price move.

Do you know what are the allowed charges in your buy and sales contract?

You have to wait for the next posting. I hope you have an idea of BUY, SELL and CONTRA by now. Subscribe to my Feed for the next posting for my series on HOW TO START TRADING STOCK IN BURSA MALAYSIA.