Tuesday, August 28, 2018

Short Selling, are you sure ?

Short selling, are you ready for it?

On last April 2018, Bursa came out guild line for Intra Day Short Sell (IDSS). Technically, short selling is the sales of stock not own by seller. So, in the first place, the seller need to borrow the stock first.

However, in term of Intra Day Short Sell, the seller can sell the stock in the morning (though he not yet borrow the stock) and close the position (buy back) before market close (in Cimb's case, buy back must be done before 3:30pm). Since the seller close the position on the same day (Intra Day), there's no need to borrow the stock.

If the investor fail to close the position on same day, due to whatever reason (normally due to stock suspend from trading during the day), he may deem as non compliance with the rules and here come with all types of charges (including borrowing fee), higher brokerage and penalty (including suspension of IDSS for the client).

In fact IDSS is mean for experience investors. Basically, investor speculate they can sell high in the morning, the hope to buy back at lower price before market close. In Malaysia, short sell is highly regulated, currently only allow some 280 stocks (list of stock will be reviewed every 6 months) and all sort of rules like the stock can not drop more than 15 cents of 15% from the reference price.

Trading of short sales will also suspend if the short selling volume (RSS+IDSS+PDT) exceeds the daily maximum limit of 3% outstanding shares per security.  Also, there's one rules very confusion, which say that IDSS is not allow for period of 21 days if the company having take over announcement. In this case, how can the investors know for the past few days, there's an take over announcement?

 Hence, if you are still learning in Bursa, better get to know more before start any IDSS.

Monday, August 27, 2018

Preparation for Intra Day Short Selling

Today, 27 Aug 2018) mark as first day for Cimb to introduce IDSS (same day sort sell), though  Bursa already open it for other broker few months ago.

What is short selling?
Short selling means you sell something which you not yet have.

What is IDSS?
IDSS is intra day short selling, meaning you can short sell a list of stocks (provide by Bursa short sell list, currently about 280 stocks) approved by Bursa within a day and you need to close the position before market close (for Cimb, investor must close position before 3:30pm same day).

Whats happen if you fail to closed your short position within the day?
If this happen, you may need to borrow shares from the license shares lender, the confirmation must be done on 5pm. (must be done within 1 hours before 6pm). This will involve borrow cost and charges and subject to availability of stocks from your existing broker or other broker.

Another option is the Dealer will perform buy in on next market day with penalty of 10 tick above the previous day closing price.

For how long you can borrow the shares?
Trader who borrow shares from licensed lender must return the shares on T+6, of course involve charges calculate on daily basis. (more for the case if the stock suspend and buy back can not be performed on next market day)

What preparation need if want to participate in IDSS?
Investors who want to short sell need to sign SBL agreement with the broker. Different broket have different arrangement in terms of trading limits, cut off time, borrowing interest, penalty for fail trades and others. You need to make sure you understand all the charges and procesure before commit to short selling.

Bursa will suspend the IDSS if a stock price falls by more than 15% from the previous day's closing price, or if the gross short-selling volume exceed the daily maximum limit of 3% of outstanding shares per security.

For existing customer who want to activate IDSS a/c can go to iTradeCimb.com.my or click here to down load the forms. After sign the forms, just send back to CIMB together with all the required documents.