Oran Hall | Online trading another option for JSE stock market investors
Last week, I responded to Denise a young Jamaican residing in Japan who wanted help to find a broker who could help her set up an investment portfolio in Jamaica.
I explained how to set up an account and trade on the Jamaican Stock Exchange (JSE) through any of the stockbrokers licensed to do so, and also suggested that she could engage a licensed securities dealer who offers portfolio management services.
Individuals, especially those living abroad like Denise, and businesses desiring to trade in securities listed on the JSE have a convenient option for trading on the Exchange the JSE online trading platform. Online trading is the buying and selling of securities via the Internet.
It allows investors to enter orders directly to the JSE trading system via an online platform. Orders are queued and are executed based on priority, but high Internet traffic may impact the ability of online investors to access their account or transmit their orders.
All investors must have a relationship with a broker to participate in online trading, meaning that a broker must open the account; thereafter, investors are able to enter transactions online, but they are routed through the broker
In addition to the account with the broker, an account with the Jamaica Central Securities Depository (JCSD) is required to trade online. A JCSD account is an electronic account for holding securities on behalf of an investor. Investors should consult their broker to learn what is required to open a JCSD account.
Investors can make a request to open a JCSD account by way of the Internet after completing the registration process. They can begin to trade online after the broker has set up the JCSD account and they have added it to the platform. Investors who previously had a JCSD account can use it for online trading.
A JCSD account is usually opened within 72 hours of the investor submitting the required documents to the broker, but the account does not become active until the broker submits the required documents to the JCSD.
Funds must be in the investor's broker account before the investor can trade online. Investors are able to request funds from their broker account via the online trading platform. Funds may be requested and released as required.
CLOSING AN ACCOUNT
To discontinue using a JCSD account for trading online, investors may submit a request to their broker via the platform and are notified by the broker when the process is completed.
Investors can buy and sell any security that is traded in Jamaican dollars on the JSE and can buy or sell a minimum of 100 units of ordinary stock and 1000 units of bonds. Trading is done in Jamaican dollars.
Investors can place orders 24 hours a day, seven days a week. Orders placed outside of market hours and trading days are held and sent to the market on the next trading day.
The market is open Mondays to Fridays between the hours of 9 a.m. and 1 p.m. Orders placed between 9 a.m. and 1 p.m. on trading days are sent directly to the market.
Orders queued and executed take the time stamp at the time they are processed by the JSE trading system, but investors can cancel or modify an order any time before execution.
The accounts of investors are updated by the system as activities occur or a status has changed. Statuses may be pending, queued, cancelled, partially filled or filled, for example. Investors can also view transaction details for the history of their trading activities.
Investors get confirmation after a trade has been done: a confirmation page is displayed with the trade details, and a contract note is prepared and sent by the broker to the investor. All trades are final so investors cannot request a change to their orders after they have been executed.
Settlement of a transaction is processed three business days from the date the trade was completed referred to as T+3. To pay for securities purchased, the account established by the investor with the broker is debited with the amount used for the purchase.
The Online Trading Platform calculates fees on the assumption that the order will be filled all at once. There are instances, however, where multiple trades may be required to fill an order, resulting in additional trade fees not initially calculated.
In these instances, it is necessary for the 'fund buffer' to be activated. The amounts from the fund buffer will be applied to cover the cost of the JCSD fees in the event the investor's fund account cannot cover the cost of fees for any additional trades.
To receive the proceeds from the sale of securities, the investor's online fund account is updated with the proceeds from the online sales or the investor may submit a request to the broker to withdraw funds if required.
Investors can sell securities and use the funds immediately to buy new securities but must bear in mind that the funds will not be available until the sale is settled. Investors can also buy and sell a security the same day.
In the event of a systems failure on the online trading platform, investors may contact their broker for assistance using the method of contact that was agreed between them at the initial account opening stage.
Investors engaging in online trading should be prepared to devote some time to do research to make them better able to make profitable decisions.
- Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel. Email firstname.lastname@example.org