Unlocking Indonesia’s Domestic Financial Resources : The Role of Non-Bank Financial Institutions P.S. Srinivas Lead Financ...
Overview of Indonesian Financial Sector <ul><li>Indonesia’s financial sector is currently dominated by commercial banks  <...
<ul><li>Countries need both banks and NBFIs to have a well–developed financial system </li></ul><ul><li>NBFIs mobilize and...
Highlights of the Report <ul><li>Non-Bank Financial Institutions (NBFIs) control over Rp. 375 trillion in assets (of which...
<ul><li>Regulatory framework is broadly reasonable </li></ul><ul><ul><li>Passing new laws and/or regulations is not the pr...
Key findings and recommendations (2)  <ul><li>Debt markets </li></ul><ul><ul><li>Improve coordination between Bank Indones...
Key findings an drecommendations (3) <ul><li>Pension funds </li></ul><ul><ul><li>Improve offsite supervisory capacity </li...
Key findings and recommendations (4) <ul><li>Leasing/multifinance </li></ul><ul><ul><li>Develop credit information systems...
Report dissemination, ongoing initiatives, and expected impact <ul><li>Dissemination </li></ul><ul><ul><li>Parts of the re...
<ul><li>ANNEX </li></ul><ul><li>Background information and key issues </li></ul>
<ul><li>Relatively small </li></ul><ul><ul><li>Outstanding fixed income instruments* Rp 506 trillion (19% of GDP), compare...
<ul><li>Illiquid market </li></ul><ul><ul><li>Limited access to BI-SSSS </li></ul></ul><ul><ul><li>Narrow participation in...
Pension Funds Market Structure &  Key Issues <ul><li>Rp 107 tr assets (4.7% GDP) in 2004.  Low comparatively.  Half of the...
<ul><li>Small, fragmented and concentrated.  </li></ul><ul><ul><li>Rp. 75 trillion in assets </li></ul></ul><ul><ul><li>As...
Insurance Market Key Issues <ul><li>Some large insurance firms are considered to have solvency issues </li></ul><ul><li>Se...
<ul><li>Two possibly structures:  </li></ul><ul><ul><li>Collective investment contract (KIK) and corporate structure </li>...
<ul><li>Redemption run in 2005 </li></ul><ul><ul><li>In March 2005, SBI rate was increased to counteract the rising inflat...
<ul><li>Multifinance includes leasing, factoring, and consumer and credit card finance </li></ul><ul><li>Total lending Rp....
<ul><li>Narrow funding sources: </li></ul><ul><ul><li>Banks are the dominant financiers and in increasing number of cases,...
<ul><li>History </li></ul><ul><ul><li>Started in 1973 with BPUI, later in 1988 BPUI created subsidiary Bahana Artha Ventur...
<ul><li>Relatively small: 30% of GDP (Thailand 70%) </li></ul><ul><li>Highly concentrated: Top 10 companies have 50%+ of m...
<ul><li>Underlying corporate health </li></ul><ul><ul><li>Profitability: 10% return on invested capital in 2004 compared w...
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Unlocking Indonesia's Domestic Financial Resources : The Role ...

  1. 1. Unlocking Indonesia’s Domestic Financial Resources : The Role of Non-Bank Financial Institutions P.S. Srinivas Lead Financial Economist The World Bank Office, Jakarta, Indonesia January 11, 2007
  2. 2. Overview of Indonesian Financial Sector <ul><li>Indonesia’s financial sector is currently dominated by commercial banks </li></ul><ul><li>Indonesian banking sector is not yet a source of long-term capital </li></ul>29.4 N/A 801 Equity market capitalization (2005) 30.1 N/A 680 Equity market capitalization (2004) 67.6 100.0 1,844.5 Total 2.3 3.4 62.8 Outstanding corporate bonds (2005) 0.1 0.1 2.7 Venture capital companies (2005) 1.1 1.6 29.4 Mutual funds (2005) 0.6 0.8 14.7 Rural institutions (2004) 0.2 0.3 4.8 Pawnshops (pegadaian) (2005) 0.4 0.5 10.1 Securities firms (2004) 4.7 5.8 107.1 Pension funds (2004) 2.8 4.1 75.1 Insurance companies (2005) 2.5 3.7 67.7 Finance companies (2005) 13.7 20.3 374.5 Non-bank financial institutions 53.9 79.7 1,470.0 Banks (2005) Percent of GDP Percent of assets Assets (Rp trillion) Type of institution and year
  3. 3. <ul><li>Countries need both banks and NBFIs to have a well–developed financial system </li></ul><ul><li>NBFIs mobilize and allocate long term domestic resources for financing development </li></ul><ul><ul><li>Indonesia needs an additional annual infrastructure investment of US$ 5 billion to reach the government’s 6 percent per year medium term economic growth target. Domestic resources help mitigate financing risks. </li></ul></ul><ul><ul><li>Government’s borrowing strategy calls for increasing share of long-term domestic debt </li></ul></ul><ul><li>NBFIs help meet Government objectives: </li></ul><ul><ul><li>Improving access to financial services </li></ul></ul><ul><ul><ul><li>Leasing increases the financing available for SMEs </li></ul></ul></ul><ul><ul><ul><li>Venture capital firms support entrepreneurship and job creation </li></ul></ul></ul><ul><ul><ul><li>Pension and insurance companies offer risk mitigation products for individuals and companies </li></ul></ul></ul><ul><ul><li>Reducing the cost of financial services </li></ul></ul><ul><ul><ul><li>Increased competition between financial service providers lead to more efficient products and services offered at reduced costs </li></ul></ul></ul><ul><ul><li>Improving the stability of the financial system to support sustained growth and poverty reduction </li></ul></ul><ul><ul><ul><li>NBFIs are a critical part of the development of a diversified financial sector </li></ul></ul></ul><ul><ul><ul><li>Helps reduce the potential for future crises </li></ul></ul></ul>Why focus on NBFIs? <ul><li>The report focuses on the NBFI sector in Indonesia with two key outcomes in mind </li></ul><ul><li>improved mobilization and allocation of long-term domestic resources for development </li></ul><ul><li>development of a diversified financial sector </li></ul>
  4. 4. Highlights of the Report <ul><li>Non-Bank Financial Institutions (NBFIs) control over Rp. 375 trillion in assets (of which pension funds and insurance firms control about half). </li></ul><ul><ul><li>At 14% of GDP this is significant – and these need to be better managed </li></ul></ul><ul><li>Pensions and insurance assets are increasing annually at over 20% </li></ul><ul><ul><li>Implies about Rp. 40 trillion per year of fresh resources being generated </li></ul></ul><ul><li>Asset allocation needs to be substantially improved </li></ul><ul><ul><li>Insurance firms are investing one-third of their funds (Rp. 23 Trillion) in short-term deposits and mutual funds </li></ul></ul><ul><ul><li>Pensions funds invest 40% (Rp. 42 trillion) in short-term deposits and mutual funds </li></ul></ul><ul><li>Indonesia’s NBFIs are still small </li></ul><ul><ul><li>compared to its banks (about Rp. 1500 trillion) and </li></ul></ul><ul><ul><li>to NBFIs in other countries (Malaysia 138%, Thailand 32%, Singapore 170 % of GDP) </li></ul></ul><ul><li>There is tremendous potential for growth of these institutions </li></ul><ul><ul><li>Slightly more than 10% of Indonesians have a life insurance policy </li></ul></ul><ul><ul><li>Only 15 million Indonesians have formal pensions or retirement savings – including nearly 5 million civil servants </li></ul></ul><ul><ul><li>Around 100,000 domestic retail investor accounts in the stock market </li></ul></ul><ul><ul><li>Just 255,000 mutual fund investors </li></ul></ul><ul><ul><li>Leasing and venture capital firms are yet to play a major role in funding entrepreneurs and SMEs </li></ul></ul><ul><li>What is needed are sound policies for the development of NBFIs. This report provides some recommendations. </li></ul>
  5. 5. <ul><li>Regulatory framework is broadly reasonable </li></ul><ul><ul><li>Passing new laws and/or regulations is not the priority </li></ul></ul><ul><ul><li>Implementation and enforcement of existing framework needs improvement </li></ul></ul><ul><li>Make Bapepam-LK more independent as soon as possible </li></ul><ul><li>Strengthen regulatory and supervisory capacity </li></ul><ul><li>Harmonize regulation across sectors </li></ul><ul><li>Tax treatment plays a key role in sector development </li></ul><ul><ul><li>Rationalize taxation across all NBFI sectors </li></ul></ul><ul><li>Major driver of future market development will be consumer education and improvement of skills of market participants </li></ul><ul><li>Develop Public private partnerships with industry and SROs </li></ul>Key Findings and Recommendations (1) Macro stability is a prerequisite for the development of the NBFIs – this report assumes a stable environment and focuses on the sector specific issues
  6. 6. Key findings and recommendations (2) <ul><li>Debt markets </li></ul><ul><ul><li>Improve coordination between Bank Indonesia and the Ministry of Finance </li></ul></ul><ul><ul><li>Enhance the certainty of issuance </li></ul></ul><ul><ul><li>Improve market infrastructure for government bonds (for eg: KSEI participate in BI-SSSS as a subregistry – already implemented) </li></ul></ul><ul><ul><li>Improve the collection and dissemination of secondary-market pricing information </li></ul></ul><ul><li>Equity markets </li></ul><ul><ul><li>Improve corporate health and governance </li></ul></ul><ul><ul><li>Improve market structure by demutualizing and merging the Surabaya and Jakarta stock exchanges </li></ul></ul><ul><ul><li>Improve market infrastructure by implementing straight-through processing and full remote trading </li></ul></ul><ul><ul><li>Improve the environment for IPOs </li></ul></ul><ul><li>Mutual funds </li></ul><ul><ul><li>Restructure the mutual funds industry – after the 2005 debacle </li></ul></ul><ul><ul><li>Strengthen enforcement and market discipline </li></ul></ul><ul><ul><li>Develop, implement and enforce sound net asset valuation procedures </li></ul></ul><ul><ul><li>Strengthen custodians to protect investors </li></ul></ul>
  7. 7. Key findings an drecommendations (3) <ul><li>Pension funds </li></ul><ul><ul><li>Improve offsite supervisory capacity </li></ul></ul><ul><ul><li>Improve capacity of pension fund managers </li></ul></ul><ul><ul><li>Taspen </li></ul></ul><ul><ul><ul><li>Implicit civil service pension liability likely to be large </li></ul></ul></ul><ul><ul><ul><li>Continue on a pay-as-you-go basis and simplify administrative structure </li></ul></ul></ul><ul><ul><li>Jamsostek </li></ul></ul><ul><ul><ul><li>Improve governance and management </li></ul></ul></ul><ul><ul><ul><li>Encourage outsourcing of activities at Jamsostek to improve efficiency, i.e. outsource the management of a portion of Jamsostek’s assets (i.e. 5 –10%) </li></ul></ul></ul><ul><ul><li>Employees and financial pension funds </li></ul></ul><ul><ul><ul><li>Allow prefunding of severance benefits under Law 13 through tax sheltered vehicles such as a registered pension plan </li></ul></ul></ul><ul><ul><li>Formulate a coherent master plan that focuses on the implementation of SJSN and determines the respective roles of private and public sector </li></ul></ul><ul><li>Insurance firms </li></ul><ul><ul><li>Rationalize the industry </li></ul></ul><ul><ul><ul><li>Close down companies whose licenses have been revoked </li></ul></ul></ul><ul><ul><ul><li>Develop strategy, regulation and procedure for closing large and small insolvent companies </li></ul></ul></ul><ul><ul><li>Defer establishment of any policyholder protection scheme until after industry is rationalized </li></ul></ul><ul><ul><li>Improve enforcement </li></ul></ul><ul><ul><li>Promote the industry </li></ul></ul><ul><ul><li>Establish a commission of key stakeholders including industry to guide future industry strategy </li></ul></ul>
  8. 8. Key findings and recommendations (4) <ul><li>Leasing/multifinance </li></ul><ul><ul><li>Develop credit information systems to extend access to SME’s and new borrowers by relying on their reputation credit </li></ul></ul><ul><ul><li>Encourage BI to support private sector participation in consumer credit information systems. </li></ul></ul><ul><ul><li>Allow depreciation of leased assets </li></ul></ul><ul><ul><li>Increase the diversity of funding away from the banking sector to create a more competitive and diversified financial sector </li></ul></ul><ul><li>Venture capital </li></ul><ul><ul><li>Unfortunately, no quick wins here, a lot depends on improving the investment climate and corporate governance of companies </li></ul></ul><ul><ul><li>To make the industry more attractive improve exit opportunities and a stronger IPO environment </li></ul></ul><ul><ul><li>Increase sources of funds for VC firms from institutional investors such as pension funds </li></ul></ul>
  9. 9. Report dissemination, ongoing initiatives, and expected impact <ul><li>Dissemination </li></ul><ul><ul><li>Parts of the report disseminated at four workshops in 2005/05 and feedback incorporated </li></ul></ul><ul><ul><li>Report circulated to Bapepam-LK and feedback incorporated </li></ul></ul><ul><li>Ongoing initiatives </li></ul><ul><ul><li>The Government has initiated a broad reform program through the financial sector policy package in June 2006 – covering both banks and NBFIs </li></ul></ul><ul><ul><li>Bank Indonesia/MoF are working on a Financial Sector Architecture for Indonesia </li></ul></ul><ul><ul><li>Several blueprints for individual sectors are being developed – capital markets, pensions, insurance, etc. </li></ul></ul><ul><ul><li>Industry associations and other stakeholders are also interested in supporting efforts for future development of sectors. </li></ul></ul><ul><li>We hope that the report will serve as a basis for informed discussion about the role of NBFIs, their ability to meet Indonesia’s objectives, and policy actions necessary to stimulate their sound development </li></ul><ul><li>The World Bank considers it a privilege to work with the Government in this critical area of financial sector reform and we stand ready to further support the Government in its future efforts </li></ul>
  10. 10. <ul><li>ANNEX </li></ul><ul><li>Background information and key issues </li></ul>
  11. 11. <ul><li>Relatively small </li></ul><ul><ul><li>Outstanding fixed income instruments* Rp 506 trillion (19% of GDP), compared with Rp 695 trillion in banking loans and Rp 800 trillion in stock market capitalization </li></ul></ul><ul><li>Evolving trading infrastructure </li></ul><ul><ul><li>Government bonds: BI-SSSS linked with BI-RTGS and IDM’s Bloomberg terminal improved secondary trading, but access can be expanded </li></ul></ul><ul><ul><li>Corporate bonds: Secondary trading is thin, bid-ask prices difficult to obtain </li></ul></ul><ul><li>Concentrated market </li></ul><ul><ul><li>The government is the dominant issuer </li></ul></ul><ul><ul><li>Banks are major players as holders of recap bonds, investors and intermediaries </li></ul></ul><ul><li>Few infrastructure bonds </li></ul><ul><ul><li>Indonesian infrastructure needs significant investment, however, fixed income instruments have played a very minor role so far (i.e. corporate bonds issued by Jasa Marga, PDAM Jaya) </li></ul></ul>Fixed Income Market Structure * Includes government bonds, corporate bonds and BI certificates
  12. 12. <ul><li>Illiquid market </li></ul><ul><ul><li>Limited access to BI-SSSS </li></ul></ul><ul><ul><li>Narrow participation in the repo market </li></ul></ul><ul><li>Collection and distribution of pricing information </li></ul><ul><ul><li>Post trade pricing is not mandated </li></ul></ul><ul><ul><li>SSX charges the providers of trade price, disincentivizing reporting </li></ul></ul><ul><li>Legal issues </li></ul><ul><ul><li>Creditor rights and collateral repossesions need to be strengthened </li></ul></ul><ul><ul><li>Role of trust agent needs to be further clarified and strengthened to protect investors </li></ul></ul>Fixed Income Market Key Issues
  13. 13. Pension Funds Market Structure & Key Issues <ul><li>Rp 107 tr assets (4.7% GDP) in 2004. Low comparatively. Half of the total assets are public programs, half private </li></ul><ul><li>Jamsostek, has about 1/3 of total assets, suffers from low level of participation, lax enforcement and high expenses </li></ul><ul><li>Taspen, the civil service pension plan, is almost entirely unfunded and operated on a pay-as-you-go basis </li></ul><ul><li>Private pension plans are growing but operate in an unlevel regulatory environment with the public plans and mutual funds and under an unclear tax framework </li></ul><ul><li>The recent national social security law (Law no. 40 of 2004/SJSN) addresses a real need but proposes a potentially unaffordable and ambiguous structure </li></ul><ul><li>Pension plans pool long-term assets but do not invest them in long-term. Jamsostek and private pension funds invest 43% and 33% of their assets in short term bank deposits. </li></ul>
  14. 14. <ul><li>Small, fragmented and concentrated. </li></ul><ul><ul><li>Rp. 75 trillion in assets </li></ul></ul><ul><ul><li>As of Dec-05, 152 insurance companies (51 life, 101 non-life) </li></ul></ul><ul><ul><li>The 10 largest life insurance firms control nearly three-fourths of industry assets </li></ul></ul><ul><ul><li>Penetration, premiums as a % of GDP, is low, 1.4 %, compared with 3.5% in Thailand and 5.4% in Malaysia. </li></ul></ul><ul><ul><li>Density, premium per capita, is also low, $10.1, compared with $52 in Thailand and $140 in Malaysia </li></ul></ul><ul><li>Institutional quality and demographics are more likely explanations than cultural and religious ones </li></ul>Insurance Market Structure
  15. 15. Insurance Market Key Issues <ul><li>Some large insurance firms are considered to have solvency issues </li></ul><ul><li>Several companies lost their licenses but yet to be closed </li></ul><ul><li>26% of assets are invested in bank deposits </li></ul><ul><li>More than half of new life insurance sales replaces business lost during the year. Lapses and surrenders account for most of the terminations </li></ul><ul><li>Taxes arrest development of annuitization for pension assets, regulatory treatment of unit-linked products is not consistent with the treatment of the mutual funds. </li></ul>
  16. 16. <ul><li>Two possibly structures: </li></ul><ul><ul><li>Collective investment contract (KIK) and corporate structure </li></ul></ul><ul><ul><li>KIK is the predominant structure, corporate structure is harder to set up </li></ul></ul><ul><li>Investment managers </li></ul><ul><ul><li>Funds are managed by investment management companies, which are securities firms licensed by Bapepam </li></ul></ul><ul><li>Investors </li></ul><ul><ul><li>80% of subscriptions by individuals. Average unit ~Rp 300 million </li></ul></ul><ul><li>Fees </li></ul><ul><ul><li>Fees as much as 3.25 percent in annual fees, as well as well as up-front and redemption fees. (Average expense ratio of 1.5 percent in the US) </li></ul></ul><ul><li>Sales and distribution channels </li></ul><ul><ul><li>Indirectly by commercial banks, insurance companies, and brokers and directly by investment management companies </li></ul></ul><ul><ul><li>Commercial banks dominant, selling more than 75% of net asset value </li></ul></ul><ul><li>Tax exemption </li></ul><ul><ul><li>Fixed-income mutual funds are tax exempted on interest income and capital gains from bonds for the first five years after a fund is created </li></ul></ul>Mutual Funds Market Structure
  17. 17. <ul><li>Redemption run in 2005 </li></ul><ul><ul><li>In March 2005, SBI rate was increased to counteract the rising inflation due to hike in oil prices. Higher interest rates reduced bond prices and NAV’s. Some investment manager did not comply with Bapepam’s mandated mark to market regulations and this eroded investor’s confidence and led to a redemption run on fixed income funds </li></ul></ul><ul><li>Poor asset valuation </li></ul><ul><ul><li>Bapepam has a regulation for use of reference prices, however some investment managers did not comply in 2005 </li></ul></ul><ul><li>Misrepresentation of products </li></ul><ul><ul><li>Many sales agents failed to explain the nature of the product to investors, and this created the impression that the product was a banking product. Investors did not understand the relative impact of income and capital gain or loss on their investment returns and panicked when bond prices dropped </li></ul></ul>Mutual Funds Market Key Issues
  18. 18. <ul><li>Multifinance includes leasing, factoring, and consumer and credit card finance </li></ul><ul><li>Total lending Rp. 67.7 trillion </li></ul><ul><ul><li>70% in consumer and credit card finance (Grown 5 times since 2000) </li></ul></ul><ul><ul><li>Rest in leasing and factoring </li></ul></ul><ul><li>Sources of funds are equity, bonds and commercial bank loans </li></ul><ul><li>Performance is good, 23% return on equity in 2005 </li></ul><ul><li>Consumer finance is heavily concentrated on automobile and motorcycle loans and is not well diversified </li></ul><ul><li>Non-performing and doubtful loans were 0.5% for consumer finance, 9.1% for credit cards, 6.2% for leasing and 22.7% for factoring as of 2005 </li></ul>Multifinance Market Structure
  19. 19. <ul><li>Narrow funding sources: </li></ul><ul><ul><li>Banks are the dominant financiers and in increasing number of cases, investors in multifinance companies. This has created a situation in which commercial banks can influence multifinance companies’ lending decisions. </li></ul></ul><ul><li>Leasing can become a strong source of financing for SME’s. Several factors are holding back its potential: </li></ul><ul><ul><li>Inadequate enforcement of contracts and collateral repossession </li></ul></ul><ul><ul><li>Weak project appraisal skills </li></ul></ul><ul><ul><li>Unfavorable tax treatment. </li></ul></ul><ul><ul><ul><li>Leased assets cannot be depreciated. </li></ul></ul></ul><ul><ul><ul><li>Leasing can only be offered to taxpayers with tax identification numbers. Consumer finance is not subject to this. </li></ul></ul></ul><ul><ul><ul><li>Operating leases are not exempt from VAT and withholding taxes </li></ul></ul></ul>Multifinance Market Key Issues
  20. 20. <ul><li>History </li></ul><ul><ul><li>Started in 1973 with BPUI, later in 1988 BPUI created subsidiary Bahana Artha Ventura for VC investments in SME’s </li></ul></ul><ul><ul><li>1995 - creation of private VC firms </li></ul></ul><ul><li>Structure </li></ul><ul><ul><li>Very small, Rp. 2.7 trillion in assets (0.1% of financial sector) </li></ul></ul><ul><ul><li>Number of VC companies has stayed at 60 since 2001 </li></ul></ul><ul><ul><li>Ownership dominated by state and business groups </li></ul></ul><ul><ul><li>Indonesian VC companies are generally in the business of lending, not in the business of taking on equity risk </li></ul></ul><ul><li>Funding and investments </li></ul><ul><ul><li>Raising funds from the public and issuance of debt securities is prohibited for VC firms </li></ul></ul><ul><ul><li>Return on investment has been low, less than 3% between 2000-2005 </li></ul></ul><ul><li>Tax exemptions in certain sectors </li></ul>Venture Capital Market Structure
  21. 21. <ul><li>Relatively small: 30% of GDP (Thailand 70%) </li></ul><ul><li>Highly concentrated: Top 10 companies have 50%+ of market cap </li></ul><ul><li>Relatively illiquid: </li></ul><ul><ul><li>Out of more than 330 stocks, no more than 30 stocks, mostly blue chips, are actively traded </li></ul></ul><ul><ul><li>Turnover velocity is about 50%, low compared to Korea (200%), Thailand (90%) and India (75%) </li></ul></ul><ul><li>Small float: </li></ul><ul><ul><li>Top 20 public companies have 39.4% owned by public </li></ul></ul><ul><li>Performance: </li></ul><ul><ul><li>Strong recent secondary market performance. Market cap increased from Rp 680 tr to Rp. 801 tr from December 2004 to December 2005 </li></ul></ul><ul><ul><li>Weak IPO market. New capital raised as % of market cap has been between 1-3% since 2001 </li></ul></ul><ul><li>Participation </li></ul><ul><ul><li>Foreign institutions are the largest investors (over 70% of market cap) </li></ul></ul><ul><ul><li>Estimated 100,000 domestic retail investors in Indonesia (Korea 3.9 mln) </li></ul></ul>Equity Market Structure
  22. 22. <ul><li>Underlying corporate health </li></ul><ul><ul><li>Profitability: 10% return on invested capital in 2004 compared with 10% in Korea, 7% in Malaysia. Accounting for inflation, Indonesia can do better </li></ul></ul><ul><ul><li>Leverage: 11.6% of companies are over 200% leveraged in 2004, down from 45% in 1998, but still room for improvement </li></ul></ul><ul><ul><li>Corporate governance: Indonesia scored 37 in 2005, compared to 50 in Thailand and 56 in Malaysia </li></ul></ul><ul><li>Insufficient number of listed companies </li></ul><ul><ul><li>Tax issues: Many companies are hesitant to enlist because they are concerned about historical tax investigation </li></ul></ul><ul><li>Need for diversifying investor base, especially domestic retail </li></ul><ul><li>Inadequate infrastructure – </li></ul><ul><ul><li>JSX is vulnerable to a stoppage of trading should a catastrophe, such as a fire, flood, or terrorist attack, inflict damage to the floor </li></ul></ul><ul><ul><li>Remote trading not yet implemented </li></ul></ul><ul><ul><li>Two stock exchanges introduce redundancies and inefficiencies in the capital markets </li></ul></ul>Equity Market Key Issues

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