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Old 24-06-2012, 01:24 PM   #816
Shiny Things
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Join Date: Dec 2009
Posts: 8,592
Mai lah, no minimum commission for them means no more contra which also means a significant drop in volume and liquidity since more than 70% of our daily volume are contra.. U wouldn't want sti to drop till 1800 because theres no buyer except scb user and market remaining in that level in an extended period
I dunno, I think contra's a terrible idea, and the sooner it dies the better. It's pretty much an abuse of the T+3 settlement system.

It's bad for the brokers, because they're handing out interest-free loans instead of being able to charge interest on margin loans. It's bad for the exchange, because it cripples the development of derivatives markets and stock lending (because you don't need to borrow stock to be able to short it via contra). And it's bad for investors, because it gives them infinite leverage and thus infinite capacity to blow themselves up.

In fact, I'm having trouble thinking of anyone it's good for.

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I guess the brokers and the SGX are terrified of the collapse in volume that'll happen if they ban contra trading. (Is it really 70%, though? Contra's a retail thing, and there's no way the SGX's volume is >70% retail muppets.)

(And I doubt the STI would drop that far - or at all. Contra trading's a short-term thing, so it's not like people are holding huge long-term buy positions that they'd have to close out; and I'd imagine contra volumes are pretty much equally balanced between buyers and sellers... so if you ban contra, the net result would be pretty much a wash.)
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