Indonesian Capital Market

Law No. 8, 1995 regarding Capital Market stated clearly that authority and stakeholders of the Capital Market are arranged in an integrated structure.
a. Capital Market Supervisory Agency (BAPEPAM);
Duties
According to the Law of the Republic of Indonesia No. 8 concerning the Capital Market, guidance, regulation, and day-to-day supervision of capital market is provided by Bapepam in order to implement an orderly, fair, and efficient capital market activities and protect the interests of investor and public.
Function
- According to Article 3 Minister of Finance Decree No: 503/KMK.01/1997 concerning Organization of Capital Market Supervisory Agency, the functions of Bapepam are:
- drafting Capital Market rules and regulations;
- guiding and supervising any Person granted business license, approval, registration from Bapepam and other Person related to Capital Market;
- establishing disclosure principles for Issuers and Public Companies;
- settlement of the objection by Person imposed sanction by Stock Exchange, Clearing Guarantee Corporation, and Central Securities Depositary;
- establishing Capital Market accounting standards;
- Securing the technical implementation of Bapepam's main function according to the policy required by Minister of Finance and based on the Law.
Authority
Bapepam has the authority to provide license, approval and registration for all players of Capital Market, process the registration of Initial Public Offering, publish rules of conduct of the regulations in Capital Market, and perform law enforcement from violations of the regulations.
Responsibility
Bepapam is responsible to the Minister of Finance.
Complete Profile
b. Self Regulatory Organization
�� Securities Exchange
�� Definition
Securities Exchange is an entity that provides and organizes the system and facilities that are used to bring together the offering of securities buying and selling.
�� Objective
Stock Exchange was established to operate Securities trading in an orderly, fair and efficient manner.
�� Ownership
Those who are entitled to be stockholders are Securities Companies with business permits to perform as Securities Broker Dealer.
�� Obligations and Responsibilities
- Securities Exchange is obliged to provide supporting facilities and supervise Stock Exchange Member activities.
- Annual Budget Planning and Securities Exchange profit use must be planned according to regulations and reported to Bapepam.
- Securities Exchange are obligated to set rules regarding membership, listing, Securities balance, clearing and depository securities transaction and other related activities.
�� Stock Exchange Profile
- Jakarta Stock Exchange
The Jakarta Stock Exchange (JSX) came into being a privately owned company and operated stock exchange on July 13, 1992, the roots of its establishment can be traced back to the early part of this century. In 1912, under the auspices of the Dutch colonial government, Indonesia’s first stock exchange was set up in Batavia, the colony’s administrative center which then in the future become the city of "Jakarta".
Closed during the First World War and then reopened in 1925, the Batavia exchange operated alongside parallel bourses in Semarang and Surabaya until 1942, when the archipelago’s occupation by Japanese Imperial Forces curtailed further trading. In 1952, seven years after Indonesia declared its independence, the exchange was reopened in Jakarta, trading stocks and bonds issued before the war by Dutch enterprises. A nationalization program launched in 1956, however, brought trading to a halt yet again.
Not until 1977 was the exchange reopened, this time under the management of the newly created Capital Market Executive Agency (Badan Pelaksana Pasar Modal or BAPEPAM), an institution reporting to the Ministry of Finance. While trading activity and market capitalization grew over the years alongside the development of Indonesia’s financial markets and private sector – highlighted by a major bull run in 1990 – it was not until the exchange’s privatization in 1991 under the ownership of Jakarta Stock Exchange, Inc. that the JSX emerged as one of Asia most dynamic securities markets. As the result of the privatization of JSX, BAPEPAM’s function has changed to become the Capital Market Supervisory Agency (Badan Pengawas Pasar Modal).
The year of 1995 marked a new beginning for JSX. As of May 22, JSX has launched the Jakarta Automated Trading System (JATS) to replace the manual trading system. The newly installed automated trading system will facilitate greater frequency of shares trading and ensure fairer and more transparent market practice as opposed to the manual trading system.
In July 2000, JSX launched Scripless Trading aiming to enhance market liquidity and to eliminate the occurrence of lost and forgery of stocks, and to speed up process of transaction settlement.
In 2002, JSX also initiates the implementation of Remote Trading in order to increase market access, market efficiency, speed and frequency of trading.
Complete Profile
- Surabaya Stock Exchange
The Surabaya Stock Exchange (SSX) was officially opened on June 16, 1989 based on the Minister of Finance Decree No. 654/KMK.010/1989 with only thirty-six shareholders. The nature of the SSX establishment at that time was to support the Indonesian government program in the capital market field and the development of the economy in the East Region of Indonesia.
On July 22, 1995 the SSX was successfully merged with the Indonesian Parallel Stock Exchange (IPSX), leaving only two primary exchanges operating in Indonesia.
To provide and maintain facilities for the members regarding the after-trade service, the SSX has also become the shareholder of the Indonesian Central Securities and Depository (ISCD) and the Indonesian Clearing Guarantee Corporation. The SSX has also participated in the Credit Rating Agency as a shareholder.
In 1992, as part of the SSX breakthrough concept of linking the trading floor to many of its members in Jakarta, an Electronic Long Distance Trading System (ELDISTRA) was introduced. Based on the floorless model, a new system called S-MART (Surabaya Market information and Automated Remote Trading) was launched on September 19, 1996 to replace Eldistra for better overall performance.
On August 9, 2002, the SSX initiated the online trading, allowing investor to trade online via internet. In the online trading, every activity of securities trading is integrated, starting from order submission, order validation, order matching and online transaction settlement.
With approximately 95% of bonds issued in Indonesia single-listed on the SSX, in June 1997 the SSX provided information and quotation system for bonds, the OTC-FIS (Over-the-Counter Fixed Income Services). This system gives ease to players to quote bids and asks, negotiate and conduct transaction. Thus, it is expected to create a more structured and transparent market for bonds, in particular and other fixed income instruments, and eventually enhancing the overall market efficiency.
To serve as a one-stop financial service, on August 13, 2001, the SSX introduced a new market to provide investors with a wider range of investment choices, the Derivatives Market. The Derivatives market offers stock index futures, the LQ45 Futures market. LQ45 Futures is a stock index futures using the JSX's index of 45 most liquid stocks traded on the exchange. Trading of LQ45 Futures is carried out
through FATS, Futures Automated Trading System, a remote trading system with auction based.
Complete Profile
�� Stock Exchange Demutualization
�� Remote Trading System
�� On-line trading system
�� Alternate Trading System
�� Clearing Guarantee Corporation
�� Definition
A Clearing Guarantee Corporation is an entity that clears and guarantees the settlement of Securities Exchange Transactions.
�� Objective
Clearing Guarantee Corporation was established to provide services of clearing and guarantees the settlement of Securities Exchange Transactions in an orderly, fair and efficient manner.
�� Ownership
Those who are entitled to be stockholders of Clearing Guarantee Corporation are Stock Exchange, Securities Companies, Securities Administration Bureau, Custodian Bank and other Parties approved by Bapepam. The majority ownership must be held by the Stock Exchange.
�� Obligation and Responsibilities
Clearing Guarantee Corporation is obliged to determine regulations concerning its activities in clearing and guaranteeing the settlement of Securities Exchange Transactions including rules on service costs.
�� Profile
- PT KPEI (PT. Kliring dan Penjaminan Efek Indonesia)
Indonesian Clearing and Guarantee Corporation (KPEI) was founded on the basis of the Capital Market Law of 1995 to provide clearing and guarantee services in the settlement of stock exchange transactions in an orderly, fair and efficient manner.
KPEI was formed as a limited liability company upon the deed of establishment No. 8 dated August 5, 1996 in Jakarta by the Jakarta Stock Exchange and the Surabaya Stock Exchange, with respectively 90% and 10% of the founding share amounting to Rp 15 billion.
KPEI received its confirmation as a legal entity from the Minister of Justice of the Republic of Indonesia on September 24, 1996. Two years later, on June 1, 1998, it received the license to operate as a Clearing and Guarantee Institution based on the Decision Letter No. Kep. 26/PM/1998 of the Capital Market Supervisory Board (Bapepam). As an SRO (Self-Regulatory Organization) within the capital market, KPEI also carries the mission of the Government of Indonesia to enhance the role and participation of the capital market in national development. Although operating as a corporation, KPEI is in fact a non-profit organization that allocates all of its revenues to finance its operations, while its net profit, if any, is fully retained towards the continuity of its mission.
Complete Profile
�� Central Securities Depository

�� Definition
Central Securities Depository is an entity that acts as a central Custodian for Custodian Banks, Securities Companies and others.
�� Objective
Central Securities Depository was established to provide services as a central Custodian for Custodian Banks, Securities Companies and others in an orderly, fair and efficient manner.
�� Ownership
Those who are entitled to be stockholders of Central Securities Depository are Stock Exchange, Securities Companies, Securities Administration Bureau, Custodian Bank and other Parties approved by Bapepam.
�� Obligation and Responsibilities
Central Securities Depository is obliged to determine rules regarding central Custodian and Securities transaction settlement services including its service costs.
�� Profile
- PT KSEI (PT. Kustodian Sentral Efek Indonesia)
PT Kustodian Sentral Efek Indonesia (KSEI) is part of the Indonesian Capital Market community that functions as Central Securities Depository Institution (CSD) in accordance with Law No.8 of the year 1995 on the Capital Market (UUPM – Undang-undang Pasar Modal). The function of a CSD is to provide orderly, appropriate, and efficient central custodian and transaction settlement services. KSEI was established in Jakarta on December 23rd 1997 and obtained its corporate license as a Central Securities Depository Institution on November 12th 1998. In the institutional structure of Indonesia’s Capital Market, KSEI stands among other Self Regulatory Organizations, besides the Stock Exchange and the Clearing and Guarantee Institution (KPEI).
Under UUPM provisions, shareholders of KPEI consist of the Stock Exchange, Securities Companies, Custodian Banks, Securities Administration Bureaus and other relevant parties approved by Bapepam.
KSEI commenced operations on January 9th 1998 by conducting securities transaction settlement in Script environment, having taken over the function from PT Kliring Deposit Efek Indonesia, previously existing as the Clearing, Depository, and Settlement Institution. As of July 17th 2000, KSEI together with the Stock Exchange and KPEI implements scripless trading and Central Depository operations in Indonesia’s Capital Market, by utilizing the latest internet-based technology, afterwards popularly known as The Central Depository and Book-Entry Settlement System (C-BEST). In order to ensure the continuity and security of service delivery, KSEI installed the Disaster Recovery Center (DRC) as a recovery system to anticipate distortion/disturbance toward C-BEST. By June 2002, KSEI has accomplished the task of converting all registered shares in the Stock Exchange.
Fulfilling its total commitment to meet international standard work quality demands, KSEI, in the month of April 2001, for the first time achieved the ISO 9002 Certificate, standardization of which could be maintained in the May of 2002. Converting the 1994 version ISO 9002 into the 2000 version ISO 9001 Certificate, obtained in July 2003 further exerts commitment to quality.
For further expansion in the future, KSEI is preparing the implementation of cross-border settlement with foreign Central Depositories, and the implementation of Straight Through Processing (STP) and Post Trade Processing (PTP).
Complete Profile
�� Government Debt Securities Trade Organizer outside the Stock Exchange
�� Definition
The organizers are those who possess working permit from Bapepam to trade Government Debt Securities outside the Stock Exchange.
�� Objective
These organizers are established with an objective to conduct Government Debt Securities outside the Stock Exchange.
�� Obligation and Responsibilities
The organizers are obligated to:
- Provide system and facilities for trading and supervision,
- Create basic rules and ethical codes for its members,
- Set rules regarding membership, trading and trade supervision,
- Monitor Government Debt Securities activities
- Take actions towards indications of misconduct in Capital Market
- Provide reports to Bapepam
- Administrate Government Debt Securities trade
�� Profile
- Government Debt Securities Traders Associations (Himdasun)
A Self Regulatory Organization (SRO) with working license from Bapepam to perform as organizers of Government Debt Securities outside the Capital Market based on the decree of the Chairman of Bapepam No. Kep-17/PM/2003 dated March 25, 2003.
Complete Profile
c. Securities Companies

Definition
A Securities Company is a Person that engages in the business of Underwriter, Broker-Dealer and/or Investment Manager.
License
Those who are entitled to perform business activities as a Securities Company are Limited Corporation that owned a license from Bapepam.
Obligation and Responsibilities
Securities Companies are responsible toward all activities related to Securities made by directors, employees and other parties working for the company.
Each Securities Company are obliged to have a monitoring system of all activities performed by its Representatives and employees to guarantee the implementation of all regulations in Capital Market.
Functions and Activities
- Underwriter
An Underwriter is an entity that makes an agreement with an Issuer to conduct a Public Offering, with or without the obligation to purchase Securities that are not sold.
- Broker-Dealers



A Broker-dealer is a person who engages in the business of buying and selling securities for the account of others or for his own account.
- Investment Managers
An Investment Manager is a Person other than an insurance Company, pension fund or bank with respect to its own lawful activities that, as a business, manages Securities Portfolios or collective investment Portfolios for clients who are account holders.

Securities Companies Representatives (WPEE, WPPE, WMI and WAPERD)
�� License
Those who are entitled to perform activities as Underwriter Representative, Broker-Dealer Representative, Investment Manager Representative and Investment Fund Trade Agent Representative are individuals who owns license from Bapepam.
�� Profile

d. Investment Advisors
�� Definition
Investment Advisors are entities who provides advice to other parties concerning sales or purchase of Securities and charges the service they provide. Investment Advisors can be professional individuals or companies.
�� License
Those who are entitled to perform as Investment Advisors are those who have the license from Bapepam.
�� Credit Rating Companies
Credit Rating Companies are entities that publish ratings for debt securities like bonds and commercial paper.
�� profile
e. Capital Market Supporting Institutions
�� Custodian
�� Definition
Custodian is a Bank or other financial institution that provides services of safekeeping securities and others related services to securities, such as collecting dividend and interest, the settlement of securities transactions, on behalf of its clients.
�� Approval
Those who can perform the activity as a Custodian are Central Securities Depository, Securities Companies and Public Banks with the approval from Bapepam.
�� Obligation and Responsibilities
- Custodians that perform safekeepings are responsible to keep securities of account holders and fulfill other obligations in accordance to the agreement between them.
- Securities kept must be recorded in a safe manner.
- Custodians are only entitled to issue Securities or funds recorded on the Securities account on written order from the account holder or those who has the authority to act on the holder’s behalf.
- Custodians are obliged to forfeit on every loss caused by their misconduct to the account holder.
�� Profile
�� Securities Administration Bureau
�� Definition

Securities Administration Bureau is an agency responsible for registering all securities ownership and distributes entitlement of such securities.
�� Approval
Those who can perform the activity as Securities Administration Bureau are Limited Corporation that owns a license from Bapepam.
�� Obligation and Responsibilities
Securities Administration Bureau is obliged to administrate, put in safekeeping and maintain record, book, and data and written information in relation to:
- Issuers, which the bureau administers Securities;
- Securities administration services
- Management of the Securities Administration Bureau.
Securities Administration Bureau is obliged to ensure the safekeeping of every Securities and its bookkeeping, and to make a copy of all documents and keep it in a separate and safe place.
�� profile
�� Trustee
�� Definition
Trustee is an organization, usually combined with commercial bank, which act as trustee, or agent who represents all interest of bond or securities credit’s holder.
�� Approval
Trustees can be conducted by:
a. Public Bank; and
b. Others stated by Government Regulation.
To conduct the activity, Public Banks or other participants must be registered by Bapepam.
�� Obligation and Responsibilities
- Trustee shall administer, store and maintain records regarding the Issuer
- Trustee represents Security Holder in debt inside and outside Court of Justice
- Trustee obliged to forfeit loss
- Trustees are forbidden to affiliate with Issuers except those in effect of ownership or Government capital depository
- Trustees are forbidden to have credit relations with Issuers
- Trustees are forbidden to be the bearer of the same Security
�� Profile
f. Supporting Profession
Every Capital Market Supporting Profession must obey ethical codes and profession standards appointed by their associations, law and its rules of conduct.
In its activity within the Capital Market, Capital Market Supporting Profession must provide independent advice or appraisal.
�� Public Accountant
�� Definition
Public Accountant is accountants with license from the Minister of Finance and registered at Bapepam.
�� Registration
Public Accountants working in the field of Capital Market must be registered at Bapepam.
�� Obligations and Responsibilities

- must own expertise in Capital Market and fulfill the requirements of expertise through training programs held by accountant organizations or other entities provided by the association;
- able to audit according to Public Accountant Professional Standards (SPAP) adn Profession Ethical Codes, and must be independent.
Public Accountants registered to Bapepam who audits financial reports of Issuers and Public Companies, Stock Exchange, Clearing and Guarantee Institution, Central Securities Depository, and other entities in the Capital Market are obligated to provide confidential statement to Bapepam at least within 3 (three) working days in view of the fact that:
- there are violations towards rules within law and or its rules of conduct; or
- Matters endangering the situation of the audited financial institution or the importance of its clients.
�� Profile
�� Legal Consultant
�� Definition
Legal Consultants are experts in law who provides lawful opinions to others and registered at Bapepam
�� Registration
Legal Consultant working in the field of Capital Market must be registered at Bapepam.
�� Obligation and Responsibilities
- obliged to be experts in Capital Market and fulfill the requirements of expertise through training programs recognized by Bapepam;
- able to perform according to their professional standards and Profession Ethical Code, and must be independent
�� Profile
�� Appraisal
�� Definition
Appraisals are those who provide valuation on corporate assets and registered at Bapepam
�� Registration
Appraisal working in the field of Capital Market must be registered at Bapepam.
�� Obligation and Responsibilities
Able to perform according to Indonesian Appraisal Standards and Profession Ethical Code, and must be independent;
�� Profile
�� Public Notary
�� Definition
Public Notary is a public officer with authorization to produce authentic documents and registered at Bapepam.
�� Registration
Public Notary working in the field of Capital Market must be registered at Bapepam.
�� Obligations and Responsibilities
�� makes documentations of Stockholders General Assembly
�� creates Document of Article of Association and its amendment


�� prepare agreements
�� perform duties according to Profession Ethical Code and independent
�� Profile
�� Other profession appointed by Government Regulations
g. Issuer, Public Company and Investment Fund
�� Issuer
�� Definition
An Issuer is an entity performing Initial Public Offering, an offering of Securities to the public based on procedures and laws of conduct.
�� Registration Statement
Registration Statement is effective on the 45th day from the acceptance of the completed Registration Statement or earlier if stated by Bapepam.
�� Legal Form
Companies that are entitled to be an Issuer are Limited Corporations.
�� Management, Report and Information Disclosure
Issuers which have filed Registration Statement or as public firm are obligated to:
- provide periodical reports to Bapepam and announce it to the public;
- provide periodical reports to Bapepam and announce publicly events that may have affect on price of Securities at least two days after the event occurred
- Director or board of commissioner of the Issuer or Public Companies must report its their ownership and every detail of change of ownership of stock to Bapepam.
Annual Report of firms that made Public Stock Offering and Public Companies must be submitted to Bapepam in four copies and available for stockholders at least 14 days before the Stockholders Annual General Assembly.
Annual Report of firms that made Public Securities Offering in the form of debt must be submitted to Bapepam in four copies at least five months after the accounting year closes effectively. This obligation is effective until the securities are paid or due.
�� Profile
�� Public Company
�� Definition
Public Companies are corporations with at least 300 shareholders in minimum paid in capital of Rp. 3.000.000.000,00 or regulated by the government.
�� Legal Entity
Companies that are entitled to be Public Companies are limited corporations.
�� Registration Statement
Registration Statement is effective on the 45th day from the acceptance of the completed Registration Statement or earlier if stated by Bapepam.
�� Management, Report and Information Disclosure
Public Companies are obliged to:
- provide periodical reports to Bapepam and announce it to the public;
- provide periodical reports to Bapepam and announce publicly events that may have affect on price of Securities at least two days after the event occurred
- Director or board of commissioner of the Issuer or Public Companies must report its their ownership and every detail of change of ownership to Bapepam.
Annual Report of firms that made Public Stock Offering and Public Companies must be submitted to Bapepam in four copies and available for stockholders at least 14 days before the Stockholders Annual General Assembly.
Every Public Company with effective registration statement must submit periodical financial report to Bapepam.
Profile
�� Investment Fund
�� Definition
Investment Fund is a vehicle used to gather fund form the community to be invested in a Securities Portfolio by Investment Managers.
�� Registration Statement
Companies that are entitled to be a Investment Fund are Limited Corporations with the license from Bapepam.
�� Legal Entity
- Corporation; or
- Collective Investment Contract
Investment Fund in a form of Limited Corporation may be open-end or closed-end.
Investment Manager based on contract can only manage investment Fund in a form of Collective Investment Contract.
�� Management, Report and Information Disclosure
Open-end Investment Fund Investment Manager in a form of a Limited Corporation or Collective Investment Contract must assess fair market price of Securities in a portfolio every exchange day based on regulations set by Bapepam.
Limited corporation open-end Investment Fund stock price and Investment Unit value of Collective Investment Contract are arranged based on net asset value.
Custodian bank of Investment Fund must submit reports stating financial balance of every Investment Fund to Bapepam.
Custodian banks and Investment Managers must assure the availability and accuracy of data submitted in the reports.
�� Profile
h. Investors
�� Domestic (institutions and individuals)
�� Foreign (institutions and individuals)

Orderly, fair and efficient capital market activity, and investors and community protection can only be achieved through firm fundamentals and legal assurance.
a. Rules of Regulation in Capital Market:
i. Law No. 8, 1995 regarding Capital Market
ii. Government Regulations:
�� Government Regulation No. 12, 2004 regarding Amendment of Government Regulation No. 45, 1995 concerning Capital Market Activities
�� Government Regulation No. 46, 1995 regarding Formal Investigation Procedure in the Capital Market
iii. Presidential Decree
iv. Decree of the Minister of Finance
�� No. 179/KMK.010/2003 regarding Stock Ownership and Securities Companies Capital
�� No. 455/KMK.01/1997 regarding Stock Purchasing by Foreign Investor through Capital Market
�� No. 646/KMK.01/1995 regarding Ownership of Stock and Investment Fund by Foreign Investor
�� No. 645/KMK.01/1995 regarding Abrogation of the Decree of Minister of Finance No. 1548/KMK.013/1990 regarding Capital Market as modified by Decree of Minister of Finance No. 284/KMK.010/1995
v. Bapepam Rules
vi. Stock Exchange Regulations
vii. Regulations of Clearing Guarantee Corporation and Central Securities Depository
b. Other related Rules of Regulations in Capital Market:
i. Law No. 1, 1995 regarding Limited Corporations
ii. Law No. 15, 2002 regarding Money Laundering, modified Law No. 25, 2003
iii. Law No. 24, 2002 regarding Government Debt Securities

Indonesia is one of the vast developing, strategically located and most flourished country in Asia, a promising investment.
a. History of Indonesian Capital Market
i. Establishment of the Indonesian Capital Market by Dutch Indies Government
In the history of Indonesian Capital Market, equity transactions had started in the 19th century. According to Effectengids, a book published by Verreniging voor den Effectenhandel in 1939, transactions started since 1880. In December 14, 1912, Amserdamse Effectenbueurs established stock exchange in Batavia. It was reported that the Batavia Stock Exchange was the 4th oldest in Asia following Bombay, Hongkong and Tokyo.
At the beginning of the 19th century, Dutch Indies government began to grow massive-sized plantation in Indonesia. Funding came from depositors who consist of Dutch inhibitors and other European with have much higher income than the native Indonesian. From that time on, the colonial government established the capital market. After prudent preparation, the first Indonesian capital market was set up in Batavia (Jakarta) on December 14, 1912 with the name Vereniging voor de Effectenhandel (Stock Exchange) and started its operation. At the initial transaction, there were 13 members: Fa. Dunlop & Kolf; Fa. Gijselman & Steup; Fa. Monod & Co.; Fa. Adree Witansi & Co.; Fa. A.W. Deeleman; Fa. H. Jul Joostensz; Fa. Jeannette Walen; Fa. Wiekert & V.D. Linden; Fa. Walbrink & Co; Wieckert & V.D. Linden; Fa. Vermeys & Co; Fa. Cruyff dan Fa. Gebroeders. Securities traded in exchanged were stocks and bonds of Dutch companies/plantations operating in Indonesia, bonds published by government (provincial and municipality), stock certificate of American companies published by administration offices in The Netherlands and other Dutch Securities companies.
The development of the capital market was so remarkable that it attracted investors from other cities. To accommodate the demand, two stock exchange were established on January 11, 1925 in Surabaya and August 1, 1925 in Semarang. Members of the stock exhange in Surabaya at that time were: Fa. Dunlop & Koff, Fa. Gijselman & Steup, Fa. V. Van Velsen, Fa. Beaukkerk & Cop, dan N. Koster. And in Semarang were: Fa. Dunlop & Koff, Fa. Gijselman & Steup, Fa. Monad & Co, Fa. Companien & Co, serta Fa. P.H. Soeters & Co. The development of the stock exchanges were impressive as seen on the Securities value reported up to NIF 1.4 billion (if indexed by the price of subsidized rice in 1982, the value was + Rp 7 billion) derived from 250 different Securities.
ii. The closing of Stock Exchange in effect of World War II.
In the beginning of 1939, European political climate was sweltering with the rise of Adolf Hitler’s domination. Overseeing this, the Dutch Indies government took several considerations to focus Securities transactions in Batavia and closed the Surabaya and Semarang stock exchange. However, on May 17, 1940, all activities was seized and Securities must be held in reserve at the banks appointed by the government. The closing of the 3 stock exchange exasperated the liquidity of the Securities, bothered the Securities holders and affected many companies and entities to withdraw and called off their investment in Indonesia. Consequently, the break of.
World War II marked the end of capital market activity during the Dutch colonialization era.
iii. Re-activating-1 era, establishment of government bond and Emergency Law No. 15, 1952 regarding Stock Exchange.
A year after the government of The Netherlands acknowledged the independence of the Republic of Indonesia, precisely in 1950, the government issued bonds of the Republic of Indonesia. This marked the reactivation of Indonesian Capital Market.
Preceded by the establishment of Emergency Law No. 13, September 1, 1951, which soon affirmed as Law No. 15, 1952 regarding Stock Exchange, government of the Republic of Indonesia reopened the Stock Exchange in Jakarta on June 31, 1952 after being suspended for 12 years. Its operation was conducted by Money and Securities Trading Union (PPUE) which consists of 3 state banks and a few traders, and Bank of Indonesia as advisor.
Since then the Stock Exchange grew significantly, although the traded Securities are those offered before the World War II. The trading activity increased since Bank Industri Negara (state-owned industrial bank) issued bonds in 1954, 1955 and 1956. Buyers were mostly Dutch, as individuals and legal entities. All members were allowed to conduct arbitration transaction overseas especially with Amsterdam.
iv. Postponement-2 era, in conclusion of inflation in Indonesia.
The situation remained until 1958 because the trading activities began to break down and drew back. This was caused by political confrontations ran by the Indonesian government towards The Netherlands that created an unbalanced economy between the two countries which made many Dutch nationals left Indonesia.
The development worsened in effect of the dispute over Irian Jaya and the taking-over of all Dutch companies in Indonesia in accordance to Nationalization Law No. 86, 1958.
This disorder was followed by an instruction from the Board of Dutch Company Nationalization (BANAS) in 1960 to prohibit the transaction of all securities owned by Dutch companies in Indonesia including all Dutch-currency-based securities.
The inflation rate at that time was significantly high and created turmoil in the currency and capital market which made the society to loose trust. They also built negative sentiment towards Rupiah which hit its lowest value in 1966.
The decline caused low stock and bond nominal value which made them less interesting to investors. It was certainly the rise and fall of the Indonesian Capital Market during the Old Order regime.

v. Reactivating-2 era, formation of Capital Market Committee through Presidential Decree No. 52,1976.
Further steps were taken by the New Order government to restore society’s trust towards Rupiah. The government prepared the Capital Market and continuously promoted funding through savings and deposits.
In accordance with the decree from the Directors of Bank of Indonesia No. 4/16, July 26, 1968, preparation committee for Financial Market and Capital Market was formed. The result affirmed that the starting point of the Capital Market in Indonesia was designed by the government since 1952 but considering the turmoil and the undermined society, the Stock Exchange of Indonesia since 1958 until 1976 drew itself back.
After concluding their task, the committee was dismissed through a decree of the Minister of Finance No. Kep-25/MK/IV/1/72, January 13, 1972. In 1976, Indonesian Capital Market Supervisory Agency (Bapepam) and PT Danareksa was formed. Bapepam, led by the Governor of the Central Bank, was responsible to assist the Minister of Finance.
With the establishment of Bapepam, integrity to form Financial Market and Capital Market was seen once more. Besides serving as assistant to the Minister of Finance, Bapepam also acted as supervisor and manager to stock exchange.
In August 10, 1977, according to Presidential Decree No. 52, 1976, the Capital Market was reactivated and several companies go public. In the New Order the growth of the Capital Market can be divided into two periods, 1977 to 1987 and 1987 till now.
The growth of the Capital Market between 1977 and 1987 was sluggish although the government provided facilities to corporations to utilize funding from the market such as tax facilities to attract communities to play in the Capital Market.
The sluggishness at that period was caused by several problems which some of them concerned the rigid procedure of stock and bond issuance, and stock fluctuation price limits.
To overcome the problems, the government released deregulations regarding the growth of the capital market including December Policy Package 1987, October Policy Package 1988 and December Policy Package 1988.
vi. Growth Era, Deregulation Packages: December Package 87, October Package 88, December Package 88, Establishment of Surabaya Stock Exchange (SSX) and Jakarta Stock Exchange (JSX), Presidential Decree No. 53, 1990 and Decree of Minister of Finance No. 1548, 1990, Law No. 8, 1995 regarding Capital Market.
December Package 1987
The Package was to simplify stock and bond issuance requirements, cutting costs, which was once collected by Bapepam such as registration cost for securities issuance. It also provided opportunities to foreign investors to purchase securities to a maximum of 49% from the total offering.
The deregulation package removed stock fluctuation price limit from the capital market and introduced parallel exchange as an alternative choice for issuers that have not met the requirements to enter the market.
October Package 88
This package is aimed at banking sector but had certain impact towards the development of capital market. It consists of 3L (Legal, Lending, Limit), and tax charged over deposit interest.
The tax charged had a positive impact over the development of the capital market. It meant that the government provided equal treatment for banking and capital market sectors.
December Package 88
This deregulation package basically provided further drivers for capital market by giving opportunities to private corporations to conduct stock exchange.
The package was able to increase capital market activities. Until 1990 there were 153 companies listed with an investment of Rp 16.29 billion.




Establishment of Surabaya Stock Exchange (SSX) and Jakarta Stock Exchange (JSX)
Surabaya Stock Exchange was officially opened on June 16, 1989 according to Decree of Minister of Finance No. 654/KMK.010/1989 with only 36 stock holders. The establishment was to support the government in capital market and economic growth of eastern Indonesia.
On July 13, 1992, Stock Exchange was changed to Jakarta Stock Exchange (JSX) and started its role in stock market in Indonesia. It was then that Indonesian stock exchange made an increase in its capital and number of transaction.
Presidential Decree No. 53, 1990 & Decree of Minister of Finance
Besides running the operation, Bapepam also provides guidance and supervision. But these doubled tasks was eliminated with the issuance of Presidential Decree No. 53, 1990 and Decree of Minister of Finance No. 1548, 1990 which marked a new era of capital market growth. Bapepam now can focus on its duty to provide supervision on capital market.
This functionality addresses the goal of creating an orderly, fair and efficient capital market and to securing the welfare of investors and community. The task is similar to one done by Securities Exchange Commission (SEC) in the United States. It secures the fairness of capital market for investors and community from misleading activities.
Law No. 8, 1995 regarding Capital Market
Law No. 8, 1995 regarding Capital Market controls Indonesian Capital Market Structure. Bapepam is a government institution under and directly responsible to the Minister of Finance providing guidance, control and supervision on day-to-day basis in the capital market.
vii. 1995 - today
Until today, Indonesian Capital Market made an extraordinary growth. Its activities on number of companies going public in the stock exchange and Securities trading are plentiful. The number of Issuers increased from 145 companies in 1991 to 288 in July 2000 with stock distribution of 1,090.41 billion shares. The Combined Stock Price Index increased to the value of 600 at the beginning of 1994 and once came to 712,61 in February 1997.
After privatizing the Stock Exchange in 1992, Indonesian Capital Market made an increase in market capital and number of transaction. On May 22, 1995, JATS (Jakarta Automated Trading System) was implemented. It was a new system to replace manual trading and facilitated stock trading with larger frequency up to 200,000 transactions per day compared to the old system that traded only 3,800. It guarantees a more fair and transparent market activity.
On September 1996, Surabaya Stock Exchange (SSX) introduced S-MART system (Surabaya Market Information and Automated Remote Trading) that provides the opportunity to make remote transaction.
On July 2000, JSX implemented Scriptless Trading to increase market liquidity and prevent missing stocks and forgery. It also accelerates transaction completion process. In 2002, JSX also implemented Remote Trading System as an effort to increase access to market, efficiency, acceleration and trade frequency.


b. Roles of Capital Market
Besides its important role in the economy of a nation, it plays two roles simultaneously in economic function, which are creating an exchange of excess funds proprietor and one that needs funding and as financial function, providing chances and opportunities to gain capital through investment. Capital market also plays as an indicator of national economic progress and enhance economic growth by providing opportunities for companies to benefit directly from the public without waiting for internal funding from the company.
What are the benefits of the existence of Capital Market?
- Provides sources of budgeting (long term) for business community, and also allocating optimal financial resources
- Provides investment channels for investors and creating diversification possibilities
- Provides leading indicator for national economic trend
- Distribution of ownership to middle class community
- Distribution of ownership, openness and professionalism, creating healthy endeavors
- Creating interesting work fields and professions
- Provides opportunities to own a healthy and prosperous company
- Provides investment alternative in gaining profit with accountable risks through transparency, liquidity and investment diversification
- Guides transparency of the business environment and provides social control access
- Drives professional management benefit through open and good corporate governance.
- Long term budgeting sources for Issuers
c. Capital Market Today;
i. Indonesian Capital Market transaction activities:
�� Trading
�� JSX
�� SSX
�� Himdasun
�� Clearing and Guarantee
�� Central Securities Depository
ii. Indonesian Capital Market Statistics