JAKARTA. The Indonesia Stock Exchange (IDX) suspects that the marking the close practice has been common in the stock market. The practice has caused shock effects quite often, such as the decrease in the Jakarta Composite Index (JCI) at the end of trading day.
In order to prevent the marking the close practice, the IDX plans to review the pre-closing mechanism in the stock market. President Director of the IDX Tito Sulistio said, the IDX is considering implementing either transparency mechanism or random closing mechanism.
The transparency mechanism will allow the IDX to monitor the indicative price during the pre-closing from minute to minute. According to Tito, the stock exchanges of Singapore, Malaysia, and Hong Kong have implemented this mechanism.
Meanwhile, the random closing mechanism will allow IDX to cut off the calculation for the index in a random manner. Therefore, the market does not necessarily to close at 04.00 pm, but it could be randomly ranging from 03.50 pm up to 04.00 pm Indonesia Western Time Zone.
Requires a new regulation
Tito has not mentioned the exact date for the implementation of the new pre-closing mechanism. But, it is clear that the random closing system requires a new regulation as the law umbrella to implement this system.
Meanwhile, IDX does not need to have a new regulation to implement transparency system. “Therefore, firstly we will try to disclose the data at every market closing, while assessing the random closing,” Tito added. However, Tito stressed that the IDX will not reduce the trade closing time.
As information, the JCI has suddenly dropped on Friday (10/2). During the trading day, the JCI was moving in the green zone, and even hit the level of 5,400. However, in the last minutes, the JCI suddenly dropped to the level of 5,371.66.
One of the issuers, which suffered of the sudden drop in share price, was PT Bank Central Asia Tbk (BBCA). The price of BBCA’s stock, which initially slightly dropped, has suddenly dropped by 4% to Rp 15,000 per share at the end of trading day.
However, analyst at First Asia Capital David Sutyanto said that current pre-closing system allows the traders to take position after the closing. However, this has been exploited to manipulate the price.
David prefers the IDX to select the transparency scheme, which allows the IDX to disclose the pre-closing trading.
However, according to the stock market observer Satrio Utomo, the current trading mechanism has been proper. Indeed, some parties may be disadvantaged of this system. The volatility may lead the fund manager to be difficult to control their portfolio.
"But the investors are supposed to accept this kind of risk. After all, the price will return to normal on the subsequent day, after jumping in the last minutes. So there should be no problem,” he said.
As information, on 31 January, the price of PT Tiga Pilar Sejahtera Food Tbk or AISA’s share dropped by 19.02% at 04.00 pm, after had been moving in the green zone during the day. However, on the subsequent trading day, the price of AISA’s share hiked by 23.81% and returned to the range of 2017 average price.