19 May 2012
Kenanga Investment Bank was the participant who asked Bursa for a trade cancellation after selling 447,000 KLK shares at an extremely low price at RM 17 a share
Kenanga Investment Bank Bhd (Kenanga IB) says it has acted swiftly and appropriately to address an error that had prompted it to ask for a trade cancellation last week. However, the investment bank declined to explain how it ended up the intermediary for the sale of 500,000 Kuala Lumpur Kepong Bhd (KLK) shares at a low price, insisting that this was an internal matter.
Chay Wai Leong, group managing director of K&N Kenanga Holdings Bhd, the parent of the investment bank, said Kenanga IB bought KLK shares to settle the so-called error trade even before the market opened on the next trading day.
We responded very quickly with the buy-in. The management dealt with it properly and neatly. As soon as possible, we were out of it, he told StarBizWeek.
On a news report that the investment bank might have lost RM1.7mil due to the error trade, Chay said the reported figure was incorrect and that the actual amount was not big. He however refused to be specific.
We have reviewed all our internal processes and we have put in further safeguards to minimise the possibility of a recurrence, he added.
On May 11, Bursa Malaysia announced that it had received a request to cancel trade(s) arising from a participants error for KLK shares done at RM17. At the time, the stock was being bought and sold for more than RM23.
The exchange said it would communicate in due course the decision whether to allow a cancellation. At press time, there has been no update on this. However, Chay said Kenanga IB was verbally notified on the same day it made the request that there would be no cancellation.
There has been talk within the industry that the trade cancellation request might not have been due to a human error or a technical glitch as is usually the case. Instead, this could have been caused by an unauthorised use of a dealers account to put through a sell order for the KLK shares.
Chay did not deny or confirm this, but said: Its just an internal matter. Its an error trade. As has been done with most error trades, we have done the necessary rectifications, such as the buying in, which we did on Monday (May 14). As far as were concerned, the incident is over.
Its part and parcel of the business. There are hundreds of thousands of trades a year. One or two may slip up. The industry has a mechanism for this, and already has safeguards that protect all the brokers.
Earlier this week, the Kenanga IB remisiers handed a letter to the management to express their concerns over the episode and to urge that preventive measures be taken. Chay said the matters raised had been addressed.
On how Kenanga IB justified labelling the KLK trade as an error, he said: Nobody would sell shares at RM17 when they are (trading at) RM23-something. Thats an error.
He pointed out that the fact that there were only one or two trade errors occurring every year gave the comfort that these were not prevalent. Generally, the market is fair and orderly. I believe this (the KLK error trade) was an abnormal event, he added.
When asked about the possibility of a dealers account being hijacked, a Bursa Malaysia official said: Aside from information publicly available, as a matter of policy, Bursa Malaysia does not disclose details of any market transactions.