Margin and Short Selling - Indonesian Stock Exchange Regulation

The Regulation, No. III-I, is intended to provide greater clarification on the procedures for obtaining approval for margin and short selling activities by members of the Indonesian Stock Exchange (IDX). Additionally, the Regulation also provides greater legal certainty for those involved in both margin and short selling activities.

The Regulation defines all of the terms used in the Regulation. This is mere formality as it is expected that all parties involved in margin and short selling activities are already familiar with the terms and their respective definitions.

To obtain the necessary approval for margin and short selling activities, the member of the IDX must satisfy a series of listed criteria. These criteria include, among other matters, the following:

An applicant must also have in place both front office and back office systems that work in real time. This is necessary to ensure that the applicant has margin call, forced sale, and forced buy capabilities, among others.

The Regulation then goes on to enumerate matters relating to reporting, examinations, supervision, and prohibitions.

The sanctions for breach are those contained in IDX Regulation III-F. However, if the breach is one where the member is no longer in compliance with the conditions for the granted approval, then the sanction is the cancellation of the relevant approval with regards to margin and short selling.

The Regulation was issued on 30 January 2009 and comes into force on 1 May 2009.