Indonesia Tightens Market Oversight, Extends Buyback Relief to Fortify Capital Stability

Jakarta’s capital market is poised for a significant shake-up as the Indonesia Stock Exchange (IDX) and the Financial Services Authority (OJK) roll out pivotal reforms aimed at bolstering market integrity, safeguarding investors, and ensuring stability. These proactive measures, announced by top officials, underscore a renewed commitment to fostering a more transparent and resilient financial ecosystem.

IDX Escalates Battle Against Market Manipulation

In a decisive move to curb illicit trading practices, IDX President Director Jeffrey Hendrik announced on Monday, October 26, a new era of more effective stock trading supervision. The exchange is shifting towards a sharper, more targeted approach to investigations, signaling a zero-tolerance stance against price manipulation.

Targeted Investigations Replace Broad UMA Notifications

The IDX will significantly reduce the issuance of broad Unusual Market Activity (UMA) notifications. Instead, it will directly launch and publicize formal investigations into suspected price manipulation. These announcements will detail the specific transaction periods under scrutiny and identify the number of involved parties and exchange members, providing a more transparent and actionable framework for market participants.

Account Freezing Over Trading Suspensions: A Liquidity-Focused Shift

Perhaps the most impactful regulatory adjustment involves a strategic pivot from widespread stock trading suspensions to the freezing of securities accounts belonging to suspected violators. This policy revision addresses long-standing concerns from market participants, particularly retail investors.

Hendrik highlighted that previous stock suspensions often impaired market liquidity, disproportionately harming retail investors who rely on fluid trading to manage their portfolios. This targeted freezing mechanism aims to isolate bad actors without broadly penalizing the market. As he emphasized, this approach safeguards market liquidity while still ensuring accountability for transgressions. The IDX plans to socialize these adjustments with exchange members this week, targeting immediate implementation.

Fortifying Governance: Expanded High Shareholding Concentration Committee

In a concurrent move to enhance governance and credibility, the IDX is expanding its High Shareholding Concentration (HSC) committee. The committee, previously comprising four internal self-regulatory organization members, will now swell to nine members, incorporating five distinguished external experts. This expansion aims to reinforce the committee’s assessment of stocks with concentrated ownership, driving greater transparency and trust.

The new external members bring a wealth of experience:

• F. Chapman Taylor (Danantara Advisory Board)
• Prof. Dr. Mardiasmo (Chairman of the National Committee on Governance Policy)
• Prof. Dr. Eduardus Tandelilin (Professor, Gadjah Mada University)
• Alex Widi (President Director, Mandiri Sekuritas)
• Joshua Arief Tanja (President Director, UBS Sekuritas)

OJK Extends Share Buyback Relaxation to Stabilize Market

Complementing the IDX’s initiatives, Hasan Fawzi, Chief Executive of the OJK’s Capital Market, Derivative Financial Products, and Carbon Exchange Supervision, announced a crucial extension of the policy allowing issuers to conduct share buybacks without General Meeting of Shareholders (GMS) approval. This relaxation, designed to provide a vital market stabilization tool, will now remain in effect until June 2027.

This strategic extension underscores the OJK’s commitment to supporting market stability and providing issuers with the flexibility needed to navigate potential volatility in the Indonesian capital market.