Product

1. What is a stock index?

Stock index is a composite that comprises of market prices of a particular group of stocks (industrial-base, performance-base) that are listed in particular exchange. Two methods that can be used to calculate a stock index are price weighted and market capitalization (value weighted) methods. In a price-weighted index, each stock affects the index in proportion to its price per share, whereas in value-weighted (market capitalization) index, each stock affects the index in proportion to its market value.

2. What is your top-ranked product?

We specialize in derivative investments, especially the stock index futures instruments such as Nikkei 225, Hang Seng 33, Kospi 200, dan LQ 45. Since they fall into the category of stock index futures, they have similar characteristics; however, each of them also possesses unique qualities. Investors may choose the instruments that suit their personality at the most.

Return

1. I heard that derivative instruments are high in risk. Can your company guarantee that customers will not suffer a loss?

According to their characteristics derivative instruments are categorized as an investment with high risk as well as return potential (high risk, high return). We cannot assure that investors will not suffer a loss, but at our best effort we deliver update information and prudent advice to help you achieve your target return by limiting/minimizing loss potential at a certain level, for example at 5% of the total invested fund.

2. Why do I still suffer a loss even though I follow your advice?

Generally our trading recommendation possesses 75% level of accuracy. Out of 10 transactions, for example, our target is minimum 7 gaining transactions and maximum 3 losing transactions. However, the 7 gains versus 3 losses target is not profitable if the amount of profit from the 7 gains is not sufficient to offset the amount of 3 losses. Therefore, the investors have to maintain the discipline in applying the trading plan and capital management, such as the strategy of stop order/hedge order.

3. How much return should I expect from this investment?

Return always corresponds to the risk factor. Nonetheless, investors can determine their own risk tolerance. By investing carefully and prudently, with the risk tolerance of 15% - 30%, an investor may expect the return in the average level of 25% - 50%.

4. Could Pacific 2000 guarantee a fixed return? A friend of mine invested in stock index futures and lost Rp 1 billion. While interested in the investment itself, I do not want this to happen to me.

Guaranteeing a fixed return would violate the brokerage regulations. Therefore, instead of providing a fixed return, which can be considered as limiting the return, we limit the risk. At Pacific 2000, we would apply our best skills and experience to guide our clients in risk control, in order to minimize losses. The normal procedure consists of several steps, first, a while after the market opens, we inform the clients on the market direction. Second, we set up a trading plan, and third, we execute the transactions in accordance with the plan. Every transaction should be approved by the clients, unless if the clients give full authority to our staff to trade based on their own judgment. Finally, we deliver the trading confirmation to the clients, so that they can constantly monitor their fund balance.

The Trading Mechanism and Legal Aspect

1. Is it safe to deposit my money in Pacific 2000? Moreover, as far as I know, stock index futures contracts are only traded in overseas.

Not only in overseas, nowadays Indonesian investors have the privilege to trade stock index futures from home. In Indonesia, the LQ 45 stock index futures is traded in Surabaya Stock Exchange, while overseas-based stock indexes such as Nikkei 225, Hang Seng 33, and Kospi 200 are traded as a simulation in the Jakarta Futures Exchange.

Concerning the invested (deposited) fund, Pacific 2000 does not keep the fund required as a margin by itself. Instead, the funds received from clients are segregated from the company”s capital and passed on to the authorized clearing and guarantee houses, i.e. PT Kliring Penjaminan Efek Indonesia for the derivative instruments under the scope of Bapepam and PT Kliring Berjangka Indonesia for the derivative instruments under the scope of Bappebti. This mechanism is aimed to provide the investor”s protection.

2. What is Jakarta Futures Exchange?

The Jakarta Futures Exchange is the latest established exchange in Indonesia where derivative instruments such as stock index futures, commodity futures, and currency futures are traded. The Jakarta Futures Exchange operates under the supervision of Bappebti, a government body under the Department of Industry and Trade.

3. Does Pacific 2000 act as a bookmaker in this investment?

In this market Pacific 2000 has a role as a market maker, not a bookmaker. Bookmaking is illegal according to the prevailing rules in Indonesia. A market maker has to comply with the bourse mechanism and direct all orders into the market, while bookmaker takes the positions against that of the clients, without dealing with the bourse. Bappebti, as the supervisory agency for these transactions conduct a regular audit to ensure that all transactions are executed properly.

4. When the market is bullish, there will be more BUY orders and when the market is bearish there will be SELL orders. How does Pacific 2000 deal with the imbalance in transaction orders?

As a market maker, Pacific 2000 is obliged to absorb all market orders. To overcome such imbalance position, Pacific 2000 hedge the orders that could not be absorbed by the local bourse to the principal in a position as a sub broker of reputable international financial institutions.

5. Why should you apply 10 points spread in every transaction?

The policy of 10 points spread is part of the market maker mechanism, especially of those involve in the instruments that carry liquidity risk. The aim is to motivate securities houses to take the position as the market maker and in turn motivate the investors to trade with a certainty that their order will be absorbed.

6. Some other companies offer the “free margin” as well as the “free commission” facilities. Is it possible for Pacific 2000 to provide the same condition?

We do not offer the free margin and free commission facilities, because as official members of the bourses we are entitled to follow the prevailing rules, in which we have to deposit a certain amount of fund to the clearing house on every account opening and pay the transaction fee to the bourse on every trading execution. Moreover, we also compensate our staff that is involved in the transactions. As compensation, the clients get the lawful protection.

Miscellaneous

1. Is this investment categorized as gambling?

We do not consider this investment as gambling, although it can be treated as gambling. Gambling is a “game of chance”, but businesses, including this investment, follow the “universal law”, that contain both the opportunity of gaining and losing. The difference lies beneath the probability. In the “game of chance”, after a dice is thrown for many times, the probability of a target is still the same as the first throw. However, in an investment, this probability differs, because one thing and another are interrelated.

2. Does Pacific 2000 trade in this investment (house account)? Does the management also trade?

As a broker Pacific 2000 does not maintain a house account targeting on a return. But in the position as a market maker Pacific 2000 needs to hedge all excess positions in the bourses native to the indexes; therefore, an account needs to set up to facilitate this purpose. In the clearing-house this account is segregated from that of the clients, so that it’s performance will not affect the clients’; accounts.

On the other hand, according the prevailing regulations, the management as an individual is not allowed to trade, to avoid the conflicts of interest.

3. I have a very busy schedule. This investment sounds promising, but I am afraid I cannot concentrate on trading.

There are two kinds of services: full authority and non-full authority. In a full authority arrangement, we conduct all transactions based on our skills and experience following the prudent principle, and you have the access to direct the transactions and monitor your position at any time. In a non-full authority arrangement, we save your precious time by delivering a daily trade plan, which consists of market direction, entry point, stop loss point, and profit point. We believe that the trade plan is essential for your investment to grow, and at your permission we will only contact you when prices hit the determined positions (with certain tolerance level). However, should you wish to maintain a closer control over your transaction, we will update you more frequently.