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Wednesday, June 9, 2010

Market Players Positively Welcome Revised Repo Transaction Regulation

Wednesday, 09/06/2010 00:00 WIB
Irvin Avriano A.

Market Players Positively Welcome Revised Repo Transaction Regulation

JAKARTA: Market players welcome the plan of the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) to identify and permit repurchase agreement as securities collateral.

In addition to repo, the capital market authorities are also interested in including re-repo and reverse repo as accounts in the booking. Therefore, repo, rerepo, and reverse repo are included in the calculation of securities firms' adjusted net working capital (MKBD).

The new regulation is inked in the revised regulation of Bapepam-LK Regulation No.V.D.4 on Control and Protection of Securities Stored in Securities Firms. Since earlier this week, the Bapepam-LK is waiting for input from market players to formulate the religion.

"The existing regulation doesn't consider repo an account in securities firms' booking. So, it is good if the repo is put into account right now," said PT Panin Sekuritas Tbk President Director Handrata Sadeli in Jakarta yesterday.

He explained to supplement the regulation on repo, capital and financial market players needed to complete the deliberation of the master repurchase agreement (MRA).

According to him, if MRA didn't exist, there might be many violations since there was no agreement in every repo between two parties that were making transactions. "Until now, the repo agreement has not been secure enough and there is no reference benchmark."

In addition to regulate repo, the Bapepam-LK also plans to require securities firms to determine trading limit for securities firms and investors. This is inked in a clause on the requirement of risk management division in securities firms.

The existence of risk management division is inked in the draft of Bapepam-LK No.V.D.3 Regulation on Internal Control and Booking by Securities Firms, which is also going to be revised.

Some clauses on tight risk management in the regulation draft requires, among other, every securities firm to monitor the inflow and outflow of customers' funds and securities, including account opening, margin transaction and short selling.

In addition to risk management division, the Bapepam-LK in the draft also requires the existence of IT and compliance divisions. The IT division will regulate requirements for securities firms regarding online trading.

According to Handrata, risk management division had to be regulated since securities firms had been doing online trading. "Since the transaction is recorded by the system in securities firms, it will harm investors and securities firms if unmonitored." (Bisnis/iaa)

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