- Local dailies yesterday reported that TA Securities Holdings Bhd has become the first local stockbroker to fully migrate to an advanced electronic platform which rides on Bursa Malaysia Bhd's (Bursa) Financial Information Exchange (FIX) Direct Market Access (DMA) gateway.

- This is in line with Bursa's directive that all stock-broking companies migrate their trading platforms to be compliant with its DMA gateway by September 2012. DMA is often combined with algorithmic trading to give market participants a wider option of trading strategies. 

- Algorithmic trading involves the use of programmes and computers to generate and execute orders in electronic markets. Trading decisions, which include timing, price and order quantity, are pre-programmed. They are mostly used by participants involved in large trades like institutional investors and hedge funds to minimise emotional and sentiment factors. 

- Although algo trading has been gaining popularity (50%-70% of US and Europe trades, 30-40% of Asian trades), it is not without controversy, having been blamed for contributing to volatility during the '2010 Flash Crash'  in the US.

- Back in April 2008, Bursa introduced DMA for the derivatives market. This was followed by DMA for the equities market in November 2009. DMA effectively gives both the buy-side and sell-side participants equal control over an order execution as the buy-side traders can interact directly with the market order book. However, stockbroking firms are still utilising the older WinSCORE Broker Front-End System, which cannot accommodate algo trading due to the lack of an external open interface and speed.

- We believe that the ease of trade and reduction in latency (DMA reduces the time for orders to be sent and matched from the previous average of (3) seconds per transaction to a fraction of a second) is positive for Bursa's trading volumes in the longer term. The increased interest in high frequency trading, a class of algo trading which involves holding instruments for a short amount of time, should see turnover benefit, too. 

- Despite the potential increase in average daily trading values (a 10% increase will see net profits rise 7%), we are taking a cautious stance and maintaining our forecasts for now as we factor in the uncertainties in the global financial markets. As such, we re-iterate our BUY recommendation on Bursa with a fair value of RM8.50/share.