Financial software players likely to gain from ATS

FINANCIAL software players such as Excel Force MSC Sdn Bhd (Eforce) and N2N Connect Bhd may be the beneficiaries of the Alternative Trading System (ATS) that the Government is planning to introduce.

The Government said that the ATS would be introduced subject to compliance to all requirements and regulatory standards. This would enable efficient and significant transactions.

Eforce is the market leader in Malaysia for the provision of financial services business solutions where it currently has 90% of the stock broking Public Gallery Display System and 70% of electronic client ordering system market share in Malaysia.

Meanwhile, N2N is the provider of the TCPro brand of trading terminals used by nearly 70% of investment banks and brokerage firms in Malaysia

ATS is a market venue to bring together purchasers and sellers of securities. It originated in the United States as an alternative to traditional exchanges like the New York Stock Exchange and Nasdaq in trading of securities.

Since 2001, more than 50 countries have launched the ATS, providing investors with choices in execution venue. LiquidNet, Chi-X and BATS Global are the major operators.

“With an ATS, the Malaysian economy can harness solid positive effects and benefits. This will reset growth in the Malaysian capital markets vis-a-vis other stock exchanges in the region. Malaysia should lead Asean as a pioneer and innovator. This leap is aligned with our TN50 vision,” said one market observer.

Malaysia’s turnover velocity has been on a decline post-Great Financial Crisis from 34% in 2009 to 27% in 2016. This result is from lower transaction levels and liquidity in the Malaysian capital market. This is significantly lower turnover velocity when compared with Thailand, Singapore, Australia, Japan and South Korea.

Malaysia’s total trading value grew at a slower rate in 2012 to 2016 compared with its five-year gross domestic product (GDP) compounded growth of 5.1%.

Compared to other Asean peers, its trading value CAGR is below that of Thailand, Indonesia and Philippines. Similar outcome is observed when measured by end of year market capitalisation.

“The introduction of an alter- native venue in the Malaysian equity market can improve the efficiency and liquidity of the market. It will bring about multi-angled benefits to the Malaysian economy, further accelerating the creation of high value jobs and sustainable growth,” said the observer.

In a research report on ATS by PwC Consulting, it was projected that ATS would bring a cumulative GDP impact of RM3.1bil across the Malaysian economy. The increase in business investments will generate an economic output of RM 1.7bil per year, and has the potential to sustain an average of 7,500 full time equivalent jobs. ATS will open the gates to developed market participants, and significantly lower existing systemic risk of the Malaysian equity market.