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Saturday, 18 November 2017

Legal Viewpoint: Advantages of Automated Payment in Stock Exchanges

Some time back, I visited Singapore Stock Exchange, wherein all companies operating in the stock exchange

and banks have introduced a special automated payment scheme for all share or stock transactions undertaken or entered into.
In case an investor opts for this advanced service, he can have the benefit of transferring his funds electronically from his designated bank account directly to the registered account of the stock brokerage firm with which he is dealing.
At the same time, likewise, the stock brokerage company can easily bank-in the proceeds from the sale of shares directly into the designated bank account given by the investor. With this prompt, fast and easy electronic service any potential investor, we can say, no longer needs to wait in his purchases or wait when he sells his shares.
If an investor opts for the electronic payment of shares (EPS) service, he can still choose to pay by cheques, in relation to a particular purchase or request for a cheque payment for a particular sale. In all cases this, in fact, depends on the intention of the investor.
This option is left for the exclusive discretion of the investor, and he can use such discretion depending on the merits of each transaction. Dealings in stock exchanges, as a general rule, vary from one case to another and this justifies the exclusive discretion given to the investor in this respect.
As we can notice, the electronic payment for shares system (EPS) is a special advanced service given to interested investors to complement the physical cheque payment system or any other system, if any?.
The electronic payment system was introduced in Singapore Stock Exchange before some years, and was warmly welcomed and well received by the investors and all related financial sectors because they believe that this new advanced service will help in developing and expanding investments in the stock exchange.
Banks operating banking and investment business in Singapore welcomed the new electronic payment service because a plenty of time and paper work is saved or gained compared to the frequent normal service of using cheques and piles of papers in such transactions in stock exchanges.
The newly introduced ESP service, as a matter of fact, facilitates the transfer of funds between the designated bank accounts of the concerned investors and their stock brokerage firms. For clarification purposes we have to say that the electronic payment service has two systems:
The first type is technically called the EPS-Purchases, whereas the second type is technically called the EPS-Sales.
The EPS-Sales system facilitates the direct crediting of payment in Singapore dollars, from the stock brokerage company account to the account of the investor immediately after the sale of his shares. On the other hand, the EPS-Purchases system provides a facility for the investor to make payment in Singapore dollars to the stock brokerage firm for shares purchased through any ATM (automatic teller machine) in any bank operating business therein.
With reference to usage of the automated teller machines, we have to note that, this usage is restricted or given through certain machines identified by the concerned bank. There is normally a sticker on the ATM to show whether the machine is programmed for this special service or not, (This is similar to certain machines in many places wherein it is shown that the machine can give foreign currency, if the customer wants dollars \ euro for example).
In relation to EPS-Sales, the concerned bank normally receives certain instructions, from the stock market, to credit into the designated bank account the amount due to the investor from the sales of his shares in the stock exchange. After initiating payment the brokerage company will send, to the investor, a payment voucher indicating the amount and the date it will be credited into the designated bank account. Regarding EPS-Purchases, once the investor receives the contract note from the brokerage firm he can make payment for his purchase via any automatic teller machine as explained above.
The automated payment system, will no doubt, help the individual or institutional investors by saving their physical efforts and time and following this system will end the long queues standing for long time in the offices of the stock exchange.
In fact recently we may not need a big place to accommodate the stock exchange because investors will undertake and finalize their transactions without going to any office. Of course, this is one of the great advantages of electronic transactions taking place due to the e-revolution.
Let us hope that, this march will start soon in our stock markets and banks so as to give the investors a good opportunity to benefit from the advanced new IT services. Let’s go for this and benefit from such advanced advantage.