Equity products that are traded on the exchange are stocks, warrants, rights, and Exchange Traded Funds (ETF). A stock is defined as a proof of ownership entitled to a person or party (institution) for a corporation or limited liability company. By investing in the company, the person or institution has a claim on the company's income, a claim on the company's assets, and has voting rights at the General Meeting of Shareholders (GMS). Warrants are securities issued by a company that entitle the stock owners to buy additional shares of the company at a specified price for a 6 (six) months period or more. Rights are rights attached to the shares and can be transferred, which allows existing shareholders to buy new securities, including stocks or securities that can be converted into shares and warrants, before being offered to the other parties. Meanwhile, ETF is portfolio investment products that are admitted to listing or trading on a regulated exchange.
Currently, exchange transactions are dominated by equity products, especially stocks, while debts and derivatives have been less attractive to investors. Investors perceive that stock investment risk is more scalable compared to derivatives, while investors trading debt securities prefer to trade over the counter (OTC).
A. EQUITY TRANSACTION CLEARING
All of equity products traded on the Indonesia Stock Exchange (IDX) are cleared by KPEI. The clearing method used depends on the type of markets selected for the trade. Clearing methods for trades done in the Regular Market and Cash Market will be netted. As for the Negotiation Market, clearing is done by using trade for trade method.
CLEARING BY NETTING
From the multiple transactions of buying and selling securities that had been carried out by Clearing Members, one position the payment or receive in funds and one position for the delivery or receipt for each type of securities will result. Transactions on the Regular Market and Cash Market which have the same settlement date will be offset through multilateral netting, so that on the settlement date, Clearing Member will only have one position for the delivery or receipt of each instrument (cash and/or securities).
KPEI performs clearing on equity product for each Clearing Member until the client level. KPEI will then publish the clearing result in the Clearing Result List (CRL). CRL reports portfolio positions and details of rights and obligation calculations for the equities or cash for each Clearing Member and all of its clients. CRL on equity transactions in the Regular Market can be downloaded by Clearing Members no later than 19:30, while for the Cash Market no later than 12:45 on the same day the transaction occurs.
The clearing of equity transactions on Clearing Member level diagram is as follows:
Meanwhile, The clearing of equity transactions on Client level diagram is as follows:
TRADE FOR TRADE CLEARING
Equity transactions conducted on the Negotiation Market will be cleared by KPEI through trade for trade basis. The clearing method is called trade for trade because the fulfillment of the rights and obligations of every securities or cash transacted by selling and buying Exchange Members are done directly, without combining with other transactions. On the Negotiation Market, prices occurred through an agreement between the two parties, so the settlement is not guaranteed by KPEI. KPEI only issues CRL, which can download by Clearing Member at 19:30 WIB on the same day of the transaction.
In performing the clearing process, KPEI uses the Enhancement Architecture e-CLEARS (EAE) web-based application. All stages of clearing and settlement guarantee ranging from exchange transaction validation, netting, novation, positioning up to the reporting is done via EAE. In addition to the functions above, EAE can also be used as a settlement system for securities borrowing and lending services. EAE can be accessed online by using the user ID, password and keyfile assigned to each Clearing Member or Custodian Bank.
For further details on equity securities transaction clearing, please refer to KPEI Rule here.
B. EQUITY TRANSACTION CLEARING FOR DESIGNATED STOCKS
Designated Stocks (ETD) are determined by IDX and KPEI based on specific requirements. Designated stocks’ transaction settlements are not guaranteed. Exchange transactions that are categorized as ETD transactions, will be settled through negotiation by using trade for trade method. IDX and KPEI set several criteria for ETD, which consists of:
1. Securities’ ownership composition and concentration of ownership
2. Securities’ transaction pattern and volume
3. Securities’ transaction frequency
4. Securities’ price fluctuation
C. EQUITY TRANSACTION CLEARING FOR ISOLATED TRANSACTIONS
Isolated Transactions (TD) are transaction which are separated from the exchange transaction settlement guarantee under the terms set by IDX and KPEI on Indonesia FSA’s approval or under the orders of the Indonesia FSA. An exchange transaction may be categorized as a TD by the Indonesia FSA's decision is due to one or several things as follows:
1. There is a likelihood that the transaction could not be settled
2. There is an indication that the transaction is unusual/abnormal
3. The transaction has high risk and has the potential to jeopardize the market integrity
4. Other indication in accordance with KPEI Regulation
If there are indications that there is/are transaction(s) that meet TD categories above, then KPEI will do the following:
1. Delay the TD clearing process
2. Publish TD Reports
3. Publish TD CRL
4. A review by the Indonesia FSA will be performed for an unspecified time to assume the normalcy/fairness of
If the results of the Indonesia FSA review determined that the TD is a fair transaction, the settlement method will be done by netting and combined with netted position at that time. Conversely, if the transaction is concluded as unfair then KPEI will settle it by trade for trade clearing. For the two scenarios above, KPEI will republish CRL for the TD.
A detailed explanation of ETD and TD transactions can be viewed in KPEI Rule Number II-15 and Indonesia FSA Regulation No. 26/POJK.04/2014.
CLEARING OF EQUITY TRANSACTIONS SIMULATION (STOCKS):