Trading Mechanism

Before making transaction, the investor must become a customer of one security company or brokerage office. There are about 120 securities companies listed as the Exchange Members in the Jakarta Stock Exchange.

The opening document of the account encompasses complete customer’s identity (including investment targets and financial condition) and also some information regarding the kind of investment the customer will make.

The customers or investors could make selling or buying order after they have been approved as a customer in a security company. Every security company usually requires its customers to deposit a certain amount of money as a guarantee to do the transaction. The amounts of the deposit are various; for example, some security companies require their customers to deposit Rp 25 million as the gurantee fund while others ask for Rp 15 million, and so on.

Principally, there is no minimum limit of the amount of fund used to buy the shares. In stock trading, the amount of shares traded uses a trading unit called as lot. In the Jakarta Stock Exchange, one lot means 500 shares and that is the minimum limit of buying shares. The fund needed to buy them is various because the stock prices listed in exchange are also various. For instance, stock price of XYZ is Rp 1,000, so the minimum fund needed to buy a lot of share is Rp 500,000 (500 multiplied by Rp 1,000). Another illustration, if ABC’s stock price per share is Rp 2,500, the minimum fund to buy the shares is Rp 1,250,000 (500 multiplied by Rp 2,500).

In the Jakarta Stock Exchange, transactions are held on certain days called as the Exchange Days/Trading Day.

Exchange Day	Trading Session	Time
Monday to Thursday	Session I Session II	09.30 AM-12.00 PM 13.30 PM-16.00 PM
Friday	Session I Session II	09.30 AM-11.30 PM 14.00 PM-16.00 PM

Seen from the process, the sequence of share trading or other securities can be explained as follow:

1. Become a customer in a Security Company
   In this part, someone who wants to invest must become a customer or open an account in one Security Company. After officially registered as a customer, the investor can start making transactions
2. Order from customer.
   The activity of buying and selling shares is started with the instruction given by the investor to the broker. The order can be done directly, in which the investor come straightly to the brokerage company, or through means of telecommunication such as the telephone.
3. Order is sent to a Floor Trader
   Every order that comes to the broker in the brokerage company will be sent to the broker on the Trading Floor known as the Floor Trader.
4. Order is entered into the JATS
   Floor Trader will then make an entry of every order they received in the JATS computer. There are hundreds of JATS terminal in the Trading Floor to put in the customers’ orders. The orders in the JATS system will be monitored by the floor traders, brokers in the brokerage office and the investors. There should be a communication in this step between the brokers and the investors so that the buying and selling orders made by the investors can be carried out well. It is in this step also that the Floor Trader can do some changes in the order, such as changing the offering price.
5. Transaction is matched
   In this step, the orders entered in the JATS system will be matched with the suitable price, and then will be registered in the JATS system as a done transaction, which means that the buying or selling order has find the right price. The Floor Traders or the traders in the brokerage office will then inform the investors that their orders have been fulfilled.
6. Transaction settlement
   The last step of the transaction process is the transaction settlement. In this step, the investors cannot automatically receive their rights because they first have to go through several process such as clearing, transfer account, and so on until the investors’ rights is fulfilled. The investor that sells will receive the money, and the investor that buys will receive his/her shares.
   At the JSX, the settlement process takes 3 trading days. It means that if the transaction happens today (T), the rights will be received on the next three days, or known as T + 3.