Tuesday, October 29, 2013

Brokerages restricting trading on stocks

More broking houses are starting to enforce restricted trading on more and more penny stocks. AmFrasers is reported to have put 11 stocks in their restricted list while UOB Kay Hian has a list of 56 stocks. Such stocks can only be traded under conditions set by the broking houses like cash out front, limited volumes to buy per investor or for the whole house to limit the risk exposure, etc etc.
 

What would happen if the number of stocks on the restricted list increases into the hundreds? What are the implications,… that these stocks are dangerous, not fit to be listed in the exchange, not suitable for trading by normal investors? If these stocks are so dangerous, should not they be put into a separate list and investors be made to sign an indemnity form to declare they know the risk when they trade these stocks? We do not want them to complain that they did not know these stocks are so dangerous when they lose big sums of money, right?
 

Hopefully these stocks are not in the same category as Lehman Bonds or toxic notes, high risk and should not be touched with a ten foot pole. For these stocks to be listed in the main board they must be worth something or at least have some respectability and soundness, or have been vetted to be ok.
 

Let’s hope the restricted lists do not grow longer and the few stocks there are an anomaly, exceptions than the rule.

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