KLSE-TANDEM DEAL WORTH US$30M 

by Anita Devasahayam

KUALA LUMPUR: The Kuala Lumpur Stock Exchange (KLSE) has purchased Tandem fault tolerant computer systems and software estimated at US$30 million (M$81 million) from Formis Computers.

Sources said that the deal was expected to be concluded in mid‑July. The systems, comprising 12 Tandem CPUs and applications, are expected to be used solely to implement scripless trading which is expected to be fully in place in June next year.

From July I this year, however, KLSE will introduce an interim programme, the Broker Depository System (BDS).
The 12 CPUs are likely to be distributed throughout KLSE’s regional centres across the country.
Industry watchers questioned the fact that no public tender was put out for the contract. Whilst the KLSE is a private company, some argued that the amount paid for the systems was “sky high”.
The bourse is keeping mum over the purchase but Formis has confirmed the deal although it declined to reveal any details or to confirm its value.
Formis, an Applied Business Systems value‑added reseller, was recently acquired by publicly listed property group Pegi Malaysia for M$74.25 million (US$27.5 million).
BDS attempts to reduce the physical movement of scrips between stockbrokers and the Securities Clearing Automated Network Services (Scans), a clearing house.
It is believed that under BDS, brokers will send their scrips daily to the depository for processing and BDS will return the processed statements to brokers to be given to their customers.
When CDS is implemented, Scans and brokers will send information through communication links. CDS will incorporate client participation in the bourse.
Broking sources, said they had yet to receive clear guidelines on how the BDS would operate.
KLSE executive chairman, Nik Mohamed Din Datuk Nik Yusoff had said earlier this year that BDS would be the foundation Oil which the bourse would move to scripless or paperless trading.
The KLSE embarked on its computerisation efforts in the early eighties and did away with the “open cry” system by introducing personal computers.
Industry sources anticipate that the new system might create an “institutional bias” because customers will have to buy and sell through the same broker.
“It is like a bank account. If you open an account in Bank A, you can only credit and debit with that bank and not with any other bank,” a source explained.
“SKY HIGH” PRICE SHOCKS MANY IN INDUSTRY
INDUSTRY watchers and stockbrokers were stunned at the Kuala Lumpur Stock Exchange’s (KLSE) recent US$30 million (M$81 million) purchase of computer systems.
Computer vendors called the amount ludricrous and insisted that the system could be installed at one-third the price quoted by Formis. Formis has nine Tandem installations in Malaysia.
Of the 46 active stockbroking firms on the bourse, 26 are IBM users and the rest use Wang, Prime, ICL and HewlettPackard computers.
Brokers are concerned about connectivity and compatibility issues with the Tandem computers at the KLSE.
Formis Computer, incorporated in 1984, is the sole distributor for Tandem Computers in Malaysia.
Formis is also a value-added reseller of Sun Microsystem’s distributor, Applied Business Systems.
Interestingly enough, property group Pegi Holdings which owns ABS, recently made a public announcement that it would be purchasing Formis for M$74.25 million (US$27.5 million).
Formis’ general manager Jalaluddin Jaafar, also ABS’ general manager, said the activities of both companies would be streamlined under the Pegi umbrella.
A Formis spokesman said Formis had projected a turnover of M$40 million (US$14.65 million) for this year.
Last year it recorded a turnover of M$19 million (US$6.96 million).

Published in Asia Computer Weekly, June 25- July 8, 1990 Issue.