Tue | Aug 21, 2018

JSE to revert to single fee for multiple-fill orders

Published:Friday | July 20, 2018 | 12:00 AM
Marlene Street Forrest, managing director of the Jamaica Stock Exchange.

The Jamaica Stock Exchange has got to yes on a long-standing lobby by small stockholders to reinstall the 'all or none' trading rule that will allow investors to pay one fee for stock orders that are executed in multiple transactions.

JSE Managing Director Marlene Street Forrest said the rule would be implemented by year end. It will apply to both buy and sell trades.

The Financial Gleaner was unable to ascertain how many orders are executed as multiple trades. JMMB Group strategist and former president of the Jamaica Securities Dealers Association, Julian Mair, said brokerage houses do not keep such records, but his "educated guess" would be around 60 to 70 per cent.

The rule is not expected to affect brokerage fees, whose charges relate to the value of transactions and not the number of trades to execute an order.

"All-or-none instructions would result in trades being filled in less 'pieces'," explained one broker. "As such, the JCSD 'fill' fees incurred would be less. It does not really impact brokerage fees as that is charged as a percentage of trade value," he added.

However, Street Forrest said the JSE, which is the parent of the Jamaica Central Securities Depository, does not expect any significant fallout in trade fee income.

The push for the return of the 'all or none' rule is attributed to late analyst Sushil Jain. The issue returned to the forefront again last month when financial analyst and market watcher John Jackson complained at the JSE annual general meeting that the fees for multiple trades sometimes exceed the value of the order.

He also argued that it discriminated against small investors.

Street Forrest told the Financial Gleaner that while the 'all or none' feature was accommodated under a previous trading platform, Global Vision, the JSE discontinued it in 2011 when it switched to the Multiple Instruments Trading System because the feature was not heavily used.

"At that time, the investor was charged, as the system is designed, a trade fee for each trade that is executed to satisfy the order. Some market participants (investors) have called for the reinstatement of this feature but for them not to be charged for each trade making up the total execution of the order - in other words only one trade fee, which, depending on the value of the transaction, could range between $110-$660," said the JSE boss.

The exchange's tech vendor is currently assessing how the JSE platform could be customised to register one trade fee, she said. Alternatively, the JSCD could revamp how it bills for trade fees.

"With either option, we are working for a solution by the end of the middle of the fourth quarter," said Street Forrest.

"On the matter of cost for the changes, given that this was a part of the requirement from our current vendor, we are not expecting any material development cost associated with this change. The new feature will require, however, time for testing by our internal team and our brokers before implementation," she said.

avia.collinder@gleanerjm.com