IDX moves to boost market cap and trading volumes

The head of the Indonesia Stock Exchange, Ito Warsito, has said he hopes to double the bourse’s market capitalisation to $750 billion this year, thereby overtaking the Singapore Exchange. One way it plans to accelerate this growth is by improving the exchange’s technology.

IDX has been working on better integrating its infrastructure over the past two years to improve its connections between exchanges, clearing platforms, depositories, custodians, banks and regulators, says Adikin Basirun, director of information technology.

The exchange has also improved connections with Indonesia’s Debt Management Office, he tells AsianInvestor. Basirun was in Hong Kong for the February launch of local asset manager EIP’s Xie Shares range of ETFs, which include a product referencing the Indonesian stock market.

IDX's aim is to create a standardised and efficient infrastructure for the securities market, he says.

The bourse is also working on upgrading capacity of the Jakarta Automated Trading System to five times last year’s level – from 1 million orders a day to 5 million. This will also facilitate the use of direct market access (DMA) and algorithmic trading, or ‘automated ordering’, as IDX terms it.

In addition, the exchange in December joined together its cash and derivatives trading platforms. This has brought an increase in the number of foreign firms trading on IDX and using DMA and algos. They must go through a local or joint-venture broker, of which there are around 120 in Indonesia.

The breakdown of foreign versus domestic stock ownership is 60% to 40%. However, Basirun says more locals are coming in – the ratio was 70/30 last year – and he notes that trend is expected to continue.

That said, domestic investors dominate trading volumes with a share of 64.5% as of the end of December, with foreign investors accounting for 35.5%. As Warsito has pointed out, this shows that domestic investors have been traders, not long-term investors like foreign investors.

Moreover, the increasing use of online trading accounts in Indonesia has made access easier and resulted in bigger volumes. 60% of onshore brokers now offer web-based trading, says Basirun.

Another move that it is hoped will boost volumes was announced last year: to extend trading hours by opening 30 minutes or an hour earlier. But the exchange first needs to adapt to new systems, including the reporting system for adjusted net capital and separation of customers’ accounts. So it may be three to six months before the trading hours are changed.