30% for Chinese
15% for Indian ...
Huh ? What is ONE Malaysia again ?
Friday, July 31, 2009
Tuesday, July 28, 2009
Tick Size Weightage, should it be lower or higher ?
Unlike MOTS which is pretty much factual, tick size effect on the other hand has many disputable intrepretations.
Tick size is usually defined within a range of price. For example, from RM 1.00 to RM 9.99, the tick size is RM 0.01.
Tick size weightage is the tick size over the price. For example, RM 0.01 over RM 1 is 1%.
Because the tick size is definied with a range of price, the tick size weightage will differ from one price to another. For example, RM 0.01 over RM 2 is only 0.5% in relation to 1% for the RM1 example.
Some people treats tick size as an investment cost. Because if you buy and sell immediately, the buy sell spread is usually 1 tick size away (only apply to liquid investment vehicles). So you will always be selling one stick size lower than your buying price. For example, if you have just buy a share price at RM 1.01 and you want to sell it immediately, the highest buyer price would most probably be at RM 1.00, hence you may lost an additional1% of your investment by selling immediately.
For this reason some people prefer smaller tick size. The smaller it is, the lowest cost it is.
Some other people want to sell stocks to make profit as soon as possible, ie. in one tick away. However, there are always some cost associate to investment. For example in stock investment, there are brokerage fee, stamp duty and clearing fee. Assume it is 1.68% excluding the tick size effect following this example. If you sell at next up tick size which would earn you 1%, minusing the cost you still lost 0.68%.
In this scenario, one would want the tick size to be bigger than its transaction cost. In above example, the tick size should be more than 1.68%. That way, one could earn money with just one tick away - Fast and Furious !
So as you may see, sometimes we want to tick size to be as small as possible, some other times we want the tick size to be larger than our transactional cost.
Some may have spotted the problematic argument above that if tick size is bigger than transactional cost, no doubt one can 'earn' when the tick goes up, but he will lose 'MORE' when the tick goes down. Hence he is taking a big risk to expect a small reward. Although that is true, but in order to earn money the 'fastest' way, you will need this big tick size. In other words, its a risk you will have to take if you want fast profit.
Therefore, people who want bigger tick size are usually speculators. Their aims are to earn money quick. Even in a falling market, it is still possible for speculator to earn from small up trend at a particular time.
On the other hand, people who want smaller tick size are usually longer term investor. They usually have a target price and such a target is usually quite many ticks away. Hence, the size of ONE tick doest NOT bother them that much. Except that if the tick size is small, they can earn more in long run by paying lower cost.
So Long Term Investors
wants smaller tick size
while
Speculators wants bigger tick size
Do you like smaller or bigger tick size ?
Monday, July 27, 2009
KLSE New Tick Size Impact
this is a follow up post ...
This is the current tick size in KLSE. It means if you buy a stock at RM 0.900 the next up price is 0.905 and the next down price is 0.895. Like wise, if you buy a stock at RM 1.01, the next prices are RM 1.00 and RM 1.02
If we plot a graph across a range of prices, we can observe that the tick size may imply a different percentage to each price, also known as having different weightage.
For example, if we buy at RM 1.00, the tick size is RM 0.01, so the weightage is 1%. If we buy at RM 2.00, the tick size is the same but the weightage is 0.5% <== ( 0.01 / 2 * 100 )
Y axis : tick size weightage
X asix : stock price
From above chart, we can see that the tick size effect is broadly cap at 1% except when the prices are lower than RM 0.50. So buying stocks at RM1, RM5, RM10 and RM 25 have similar effect, percentage wise.
Below is the latest tick size starting from 3 Aug 2009.
When you put both graph together, the current / old tick size vs the future / new ones, you get below graphs ...
There are no changes for stock prices below RM 3.00However, all stock prices at and above RM 3.00 have significantly changes ! In short, starting on RM 3 onward, the tick size weightage is moving toward Zero as the stock price increases. With an exception at RM10+.
This brings to 2 recommendations when the new tick size is implemented;
1. Long term investors can now accumulate expensive stocks with much cheaper cost, especially those between RM 3 and RM 10.2. The only speculatable ground is now reduced to below RM 0.50 arena only.
In short, this is great for both long term investors and speculators. Generally more expensive stocks ( above RM 3 ) are running business at larger scale. Reducing speculation on these businesses and attracting more long term investors generally allow them to grow steadily and improve health on the play ground.
However Malaysia shares buyers don't really know much about Minimum Optimized Trading Size and Tick Size Weightage anyway. Most do NOT trade strategically. Hence we will most probably NOT see any BIG change in trading habits especially for retail investors.
On the other hands, fund managers are not that ignorant on this aspect. If the mutual fund you are holding also invest mostly into RM3 to RM10 stocks, like those capital growth fund. The average fund's transactional cost could save as much as 75% simply by doing nothing after 3 Aug.
Take RM10 stock for example, one tick size changes from RM0.10 to RM 0.02, that is a 80% discount!
Although this saving is actually a strategical cost saving, not a real and direct cost saving. But nevertheless this will still leave a positive impact on a fund's portfolio. So theoritically, your mutual fund should start giving you better return after 3 Aug. Fund managers who choose not to report about this cost saving in their next annual report, are fund managers you should consider challenging on their transparency, honesty and their true interest with your money.
I can finally buy more BAT ... :)
A Short Break
I want to work on Vol. 4, but they pull me back!
So, the woman who made the 911 call which led to the arrest of Skip Gates – this is the neighbor at Harvard Magazine I wrote about – is denying she is a racist on account of her color. Her lawyer – no doubt retained to negotiate a book deal or a TV appearance – says that “the fact is, she’s olive-skinned and of Portuguese descent”. That is the same as being “tobacco colored”, in the less neutral phrasing of another American of Portuguese descent. “You wouldn’t look at her and say, necessarily, ‘Oh, there’s a white woman’. You might think she was Hispanic,” says the lawyer.
Personally, whenever I see a white woman pass by, I say to myself: ‘Oh, there’s a white woman.’ I also say, ‘Oh, there’s a black woman’, when I see a black woman pass by. Until recently, I also said to myself, ‘Oh, there’s a Chinese woman’ whenever I thought I saw a Chinese woman. But sometimes I got confused or had second thoughts: ‘Oh, maybe that was not a Chinese woman. Maybe that was a Korean woman.’ So now I lump together Chinese, Korean and Japanese women, together with Malaysian, Singaporean, Thai, Filipino, Burmese and Vietnamese women and throw in Sri Lankan and even Indian women for good measure and just say to myself, ‘Oh, there’s an Asian woman.’ That is what I do in post race America when I walk down 5th Avenue.
The caller’s lawyer categorically rejected that her client ever spoke to the arresting Officer Crowley, although that is precisely what Officer Crowley has written in his report. “She went on to tell me that she observed what appeared to be two black males with backpacks on the porch of Ware Street,” his report says.
So of the two main characters involved in Gates arrest, at least one is a liar. Or all three, if you count the lawyer. Of course, this is no Rashomon. We see through these characters as if looking at a glass menagerie.
Finally, the caller’s lawyer finishes with this gem: “All she reported was behavior, not the skin color.”
MLK’s dream is coming close to realization. Blacks are judged not by the color of their skin but the nature of their activities on their front porch. Now that is not the same as the “content of their character”, but patience.
At times like these, I pity the poor souls who do not live in the U.S.; to think how much entertainment – incessant, polymorphous and free entertainment – they miss.
Now I really must get back to work.
So, the woman who made the 911 call which led to the arrest of Skip Gates – this is the neighbor at Harvard Magazine I wrote about – is denying she is a racist on account of her color. Her lawyer – no doubt retained to negotiate a book deal or a TV appearance – says that “the fact is, she’s olive-skinned and of Portuguese descent”. That is the same as being “tobacco colored”, in the less neutral phrasing of another American of Portuguese descent. “You wouldn’t look at her and say, necessarily, ‘Oh, there’s a white woman’. You might think she was Hispanic,” says the lawyer.
Personally, whenever I see a white woman pass by, I say to myself: ‘Oh, there’s a white woman.’ I also say, ‘Oh, there’s a black woman’, when I see a black woman pass by. Until recently, I also said to myself, ‘Oh, there’s a Chinese woman’ whenever I thought I saw a Chinese woman. But sometimes I got confused or had second thoughts: ‘Oh, maybe that was not a Chinese woman. Maybe that was a Korean woman.’ So now I lump together Chinese, Korean and Japanese women, together with Malaysian, Singaporean, Thai, Filipino, Burmese and Vietnamese women and throw in Sri Lankan and even Indian women for good measure and just say to myself, ‘Oh, there’s an Asian woman.’ That is what I do in post race America when I walk down 5th Avenue.
The caller’s lawyer categorically rejected that her client ever spoke to the arresting Officer Crowley, although that is precisely what Officer Crowley has written in his report. “She went on to tell me that she observed what appeared to be two black males with backpacks on the porch of Ware Street,” his report says.
So of the two main characters involved in Gates arrest, at least one is a liar. Or all three, if you count the lawyer. Of course, this is no Rashomon. We see through these characters as if looking at a glass menagerie.
Finally, the caller’s lawyer finishes with this gem: “All she reported was behavior, not the skin color.”
MLK’s dream is coming close to realization. Blacks are judged not by the color of their skin but the nature of their activities on their front porch. Now that is not the same as the “content of their character”, but patience.
At times like these, I pity the poor souls who do not live in the U.S.; to think how much entertainment – incessant, polymorphous and free entertainment – they miss.
Now I really must get back to work.
Sunday, July 26, 2009
update EPF nominees when any one of them dies
I haven't confirmed this with EPF yet but drom my past 15 years of experience dealing with them, I am not surprise if this is true. Please exercise caution with this info and take good care of your EPF savings.
Info Sharing.
|
The Way Markets Work (in the age of speculative capital)
This past Friday, the New York Times had a front page article on “high frequency trading”. Under the heading “Stock Traders Find Speed Pays, In Milliseconds”, it said that “powerful computers, some housed next to the machines that drive marketplaces like New York Stock Exchange, enable high frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.”
The paper went on to explain how high frequency trading works. You can read the full article here. But you don’t have to. In high frequency trading, large orders by the institutional traders are shown – “flashed” – to equally large trading houses a few milliseconds before they are made public. The trading houses then exploit this information by getting ahead of the market.
Flash trades are available to anyone for a fee, in the same manner that live price quotes are available to anyone for a fee. The rest have to live with the “delayed” prices. So pompous posturing of Schumer notwithstanding, there is nothing unusual or unethical about it, certainly not with the prevailing standards in capital markets. In fact, the concept is the evolution of the “day trading” that attracted quite a following in the early 1990s.
The destruction of capital that took place in the recent crisis eliminated the possibility of creating “equivalent positions”, so speculative capital has had to return to its roots of buying and selling the same security. That is what day traders did in the early 1990s, only now the size of capital must be much larger. Gone forever are the days where a few street smart kids with $50,000 in capital and their “level II” machines could earn a living. It is this wholesale nature of the markets that creates perception of “unfairness”. The real unfairness though, lies in the fact that some folks have money, others don’t.
The Times had the good sense to focus on buying. Intercepting a sell order from an institutional investor is trickier because it might – and probably would – run afoul of rules designed to prevent short sales. But I am sure no institution that has allocated billion of dollars to trading and has placed its machines next to NYSE computers – to minimize the distance traveled by electrical signals – would contemplate any improper conduct.
High frequency trading is the “natural” way markets operate in the age of speculative capital. Whether you have a problem with it or not, I suggest you get used to it.
The paper went on to explain how high frequency trading works. You can read the full article here. But you don’t have to. In high frequency trading, large orders by the institutional traders are shown – “flashed” – to equally large trading houses a few milliseconds before they are made public. The trading houses then exploit this information by getting ahead of the market.
Flash trades are available to anyone for a fee, in the same manner that live price quotes are available to anyone for a fee. The rest have to live with the “delayed” prices. So pompous posturing of Schumer notwithstanding, there is nothing unusual or unethical about it, certainly not with the prevailing standards in capital markets. In fact, the concept is the evolution of the “day trading” that attracted quite a following in the early 1990s.
The destruction of capital that took place in the recent crisis eliminated the possibility of creating “equivalent positions”, so speculative capital has had to return to its roots of buying and selling the same security. That is what day traders did in the early 1990s, only now the size of capital must be much larger. Gone forever are the days where a few street smart kids with $50,000 in capital and their “level II” machines could earn a living. It is this wholesale nature of the markets that creates perception of “unfairness”. The real unfairness though, lies in the fact that some folks have money, others don’t.
The Times had the good sense to focus on buying. Intercepting a sell order from an institutional investor is trickier because it might – and probably would – run afoul of rules designed to prevent short sales. But I am sure no institution that has allocated billion of dollars to trading and has placed its machines next to NYSE computers – to minimize the distance traveled by electrical signals – would contemplate any improper conduct.
High frequency trading is the “natural” way markets operate in the age of speculative capital. Whether you have a problem with it or not, I suggest you get used to it.
One Thing I Know About the Systemic Rot
If you are not familiar with Jean Luc Godard and his approach to film making, chances are that you will not “get” his movies. Godard believes that the “bourgeois society”, as he calls it, is so corrupt that no matter how serious and worthy a message may be, it will be corrupted by the fact of its transmission in, and to, a corrupt environment. (A Far Side cartoon had a group of clowns throwing pies in one another’s face and one of them saying, ‘But seriously, folks!’)
Godard’s way of fighting this condition is willfully corrupting the message, so that the extremity of the illogic would shock the audience and awaken them to what takes place around them.
I can see his point. Every one can see his point; just turn on the TV! There have been many studies about the control of media by a handful of organizations and the impact of such concentrations. A recent study on the influence of the Internet found that while blogs play an important role in the dissipation of the news, the agenda, what blogs discuss and write about, is set by the major news organizations. Viacom, Walt Disney, Bertelsmann, Time Warner, Vivendi and Murdach's News Corp decide virtually everything that you hear and read. After the agenda is thus set and the boundaries of discussion delineated, bloggers are left to yap to their heart’s content – within the already set boundaries. Yes, Godard does have a point.
But his response is nihilistic. It is the adult’s version of throwing a tantrum, which ultimately becomes a cop out. Frankly, I have no problem with the control of the news by a few. The reason for my insouciance? I know that no matter how partially and one-sidedly the agenda is set and how tightly the wording and the narrative of a text is controlled, a reader who is paying attention will always be able to see through the issues. That is because, to strip the matter into its elemental formulation, it is impossible to say something without revealing something about the objective reality outside us. That follows from the nature of words and discourse and is true even when there is a conscious effort to misrepresent. Hence Kissinger’s comment that no one could lie completely, and the philosopher’s observation that he learned politeness from the rude people. That was also the premise of the Hollywood movie The Usual Suspects .
So I comfortably, confidently and conveniently rely on the mainstream media for information. Needless to say, I do not stop there. Read, for example, the Destruction of Fannie Mae and Freddie Mac, which was 100 percent based on the mainstream media reports but showed something that no media outlet had ever mentioned – or ever will.
What, then, is my take on the main story of the past week about the arrest of Henry Louis Gates Jr. at his home by a uniformed member of the Cambridge Police Dept?
Let us set aside what we know about the role of authority, the kind of people who are drawn to it, the makeup of the police department in major cities of the U.S., the role that movies and TV cop shows play in shaping the conduct of police officers and the conditioning of citizens to accept that conduct, the right of citizens to live peacefully at their home (to the point of defending it with deadly force!), et, etc.
Why was Officer Crowley at Gates’ doorsteps?
Answer: Because someone had called reporting a possible break-in, no doubt by “two black men.” (The other man was the limo driver helping Gates to open the jammed lock.)
Q: Who was the caller?
A: A neighbor.
Q: Professor Gates’ house is Harvard property, given to Harvard employees only. Is it safe to assume that the neighbor was also a Harvard employee?
A: Yes, she was.
Q: The house given to Professor Gates must have been in an upscale neighborhood on account of his high position. Is it safe to assume that the neighbor had an equally high position? Surely, she could not have been a low ranking clerk, right?
A: No, she is not a low ranking clerk. In fact, she works at Harvard Magazine.
A neighbor who works at Harvard Magazine.
There you have it. Henry Louis Gates Jr.’s neighbor who works at Harvard Magazine – I would not be surprised if she had a PhD in social relations – does not recognize him in the broad daylight of a July afternoon. Never mind that she does not stop to say hello or chat or inquire about his trip to China, from which he had just returned after a grueling 16 hr flight. She absolutely does not recognize him. Consequently, naturally, the solid citizen that she is, she picks up the phone and reports a break-in.
That no one mentioned this point means that it was not considered worthy of mention by virtue of its ordinariness.
It is from this population that the arresting officer Crowley is recruited.
Everything you need to know about the significance of the story and the social background against which it took place is now at hand. From day one, then, you could have surmised – called, really – everything that unfolded, including the officer’s self-righteous rage for being criticized, the predictable defense of his act by police chiefs and radio talk shows, and even the President’s foray into the “controversy” and his subsequent backing off.
Had the event taken place in some Mississippi backwater town, the case would be dismissed as a stupid act of a county sheriff and the ignorance of the local populace. In short, it would have been the “bad apples” defense.
I never believed that Southern hillbillies are more ignorant than Massachusetts intellectuals. Furthermore, facts are not isolated events. What is real is rational. This problem certainly transcends locality, which is another way of saying that it is universal, i.e., system-wide.
By a long detour we have finally arrived at this blog’s main focus!
The most critical attribute of a systemic flaw – whether a systemic risk or a systemic rot – is its ordinariness which, by virtue of being ingrained within the “system”, renders it invisible to those inside the system. There is no uber regulator that can detect, much less prevent, a systemic collapse of the financial markets because the collapse is the end point of markets’ normal operations. That is a terrible fact, but that is the way things are, which is why despite constant urgings, I am not in a hurry to get out Vol. 4 to “capitalize” on the current crisis. We are merely in the beginning.
One question remains: How can one learn politeness from rude people without having a frame of reference, without knowing what is rude and what is polite? How would you detect the true part in the narrative of someone who is bent on telling complete lies?
I will take up these topics in Vols. 4 and 5 of Speculative Capital.
Godard’s way of fighting this condition is willfully corrupting the message, so that the extremity of the illogic would shock the audience and awaken them to what takes place around them.
I can see his point. Every one can see his point; just turn on the TV! There have been many studies about the control of media by a handful of organizations and the impact of such concentrations. A recent study on the influence of the Internet found that while blogs play an important role in the dissipation of the news, the agenda, what blogs discuss and write about, is set by the major news organizations. Viacom, Walt Disney, Bertelsmann, Time Warner, Vivendi and Murdach's News Corp decide virtually everything that you hear and read. After the agenda is thus set and the boundaries of discussion delineated, bloggers are left to yap to their heart’s content – within the already set boundaries. Yes, Godard does have a point.
But his response is nihilistic. It is the adult’s version of throwing a tantrum, which ultimately becomes a cop out. Frankly, I have no problem with the control of the news by a few. The reason for my insouciance? I know that no matter how partially and one-sidedly the agenda is set and how tightly the wording and the narrative of a text is controlled, a reader who is paying attention will always be able to see through the issues. That is because, to strip the matter into its elemental formulation, it is impossible to say something without revealing something about the objective reality outside us. That follows from the nature of words and discourse and is true even when there is a conscious effort to misrepresent. Hence Kissinger’s comment that no one could lie completely, and the philosopher’s observation that he learned politeness from the rude people. That was also the premise of the Hollywood movie The Usual Suspects .
So I comfortably, confidently and conveniently rely on the mainstream media for information. Needless to say, I do not stop there. Read, for example, the Destruction of Fannie Mae and Freddie Mac, which was 100 percent based on the mainstream media reports but showed something that no media outlet had ever mentioned – or ever will.
What, then, is my take on the main story of the past week about the arrest of Henry Louis Gates Jr. at his home by a uniformed member of the Cambridge Police Dept?
Let us set aside what we know about the role of authority, the kind of people who are drawn to it, the makeup of the police department in major cities of the U.S., the role that movies and TV cop shows play in shaping the conduct of police officers and the conditioning of citizens to accept that conduct, the right of citizens to live peacefully at their home (to the point of defending it with deadly force!), et, etc.
Why was Officer Crowley at Gates’ doorsteps?
Answer: Because someone had called reporting a possible break-in, no doubt by “two black men.” (The other man was the limo driver helping Gates to open the jammed lock.)
Q: Who was the caller?
A: A neighbor.
Q: Professor Gates’ house is Harvard property, given to Harvard employees only. Is it safe to assume that the neighbor was also a Harvard employee?
A: Yes, she was.
Q: The house given to Professor Gates must have been in an upscale neighborhood on account of his high position. Is it safe to assume that the neighbor had an equally high position? Surely, she could not have been a low ranking clerk, right?
A: No, she is not a low ranking clerk. In fact, she works at Harvard Magazine.
A neighbor who works at Harvard Magazine.
There you have it. Henry Louis Gates Jr.’s neighbor who works at Harvard Magazine – I would not be surprised if she had a PhD in social relations – does not recognize him in the broad daylight of a July afternoon. Never mind that she does not stop to say hello or chat or inquire about his trip to China, from which he had just returned after a grueling 16 hr flight. She absolutely does not recognize him. Consequently, naturally, the solid citizen that she is, she picks up the phone and reports a break-in.
That no one mentioned this point means that it was not considered worthy of mention by virtue of its ordinariness.
It is from this population that the arresting officer Crowley is recruited.
Everything you need to know about the significance of the story and the social background against which it took place is now at hand. From day one, then, you could have surmised – called, really – everything that unfolded, including the officer’s self-righteous rage for being criticized, the predictable defense of his act by police chiefs and radio talk shows, and even the President’s foray into the “controversy” and his subsequent backing off.
Had the event taken place in some Mississippi backwater town, the case would be dismissed as a stupid act of a county sheriff and the ignorance of the local populace. In short, it would have been the “bad apples” defense.
I never believed that Southern hillbillies are more ignorant than Massachusetts intellectuals. Furthermore, facts are not isolated events. What is real is rational. This problem certainly transcends locality, which is another way of saying that it is universal, i.e., system-wide.
By a long detour we have finally arrived at this blog’s main focus!
The most critical attribute of a systemic flaw – whether a systemic risk or a systemic rot – is its ordinariness which, by virtue of being ingrained within the “system”, renders it invisible to those inside the system. There is no uber regulator that can detect, much less prevent, a systemic collapse of the financial markets because the collapse is the end point of markets’ normal operations. That is a terrible fact, but that is the way things are, which is why despite constant urgings, I am not in a hurry to get out Vol. 4 to “capitalize” on the current crisis. We are merely in the beginning.
One question remains: How can one learn politeness from rude people without having a frame of reference, without knowing what is rude and what is polite? How would you detect the true part in the narrative of someone who is bent on telling complete lies?
I will take up these topics in Vols. 4 and 5 of Speculative Capital.
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