Page 29 - SC Annual Report 2018 (ENG)

Securities
Commission
Malaysia
ANNUAL
REPORT
2018

investors’ savings to match the funding needs of
issuers within the capital market. Did you
know?

In 2018, the SC embarked on a series of initiatives
to improve and ensure a broad range of • Corporate bonds and sukuk
opportunities to cater to the diverse needs of all previously only made accessible to
investors – from young retail to sophisticated seasoned sophisticated investors can now be
investors – to help manage and grow their wealth. offered to retail investors in Malaysia
without a prospectus if they meet
specific requirements. In addition,
Introducing a framework for the the range of corporate bonds and
offering of OTC Contracts for Difference sukuk that can be offered to retail
investors have also been expanded
beyond plain vanilla bonds.
Recognising investors’ need for more sophisticated
trading instruments, the SC introduced its first
framework for an over-the-counter (OTC) derivatives
product – Contracts for Difference (CFD). Following
industry consultation, the Guidelines on Contracts
for Difference was issued on 1 April 2018 and came Supporting the need for diversification
into effect on 1 July 2018. of portfolios through an enhanced
retail bonds and sukuk framework
CFDs allow investors to participate in the price
movements of an underlying instrument on a Access has long been an issue for individual
leveraged basis. Given the complexity of CFDs, the investors interested in investing in Malaysian
framework is implemented on a phased approach, corporate bonds and sukuk. Companies have
starting with sophisticated investors. In addition, traditionally concentrated on issuing corporate
underlying instruments of CFD are limited to shares bonds and sukuk to institutional investors. As such,
and equity indices. while Malaysia is the third largest bond market in
Asia (relative to GDP) and the world’s largest sukuk
8
To access this product, investors trade directly with market, participation by retail investors remains low.
9
3% addition to licensed CFD providers who will act as principal until Significant efforts were made throughout 2018 to
the workforce in the position is closed. Given the bilateral nature of increase retail investors’ access to this segment of
the market.
the trade, the SC will closely monitor the internal
the past year * risk management and control systems of the CFD
providers to ensure that the credit risk exposure to In September 2018, various measures to revise the
and from their clients are well-managed. In addition, retail bond and sukuk framework were launched. A
84% subscribe to the SC allows clients of CFD providers access to the new seasoning framework was introduced to
internet banking *** Capital Market Compensation Fund (CMCF) in the enhance retail investors’ access to existing corporate
event of a default by any of the CFD providers . bonds and sukuk currently traded by sophisticated
7
investors in the OTC market. To be eligible for access
15% early stage This new framework is in line with the SC’s by retail investors under this framework, corporate
entrepreneurs ** continuous efforts to encourage growth through bonds and sukuk are required to have been in the
widening intermediaries’ scope of business in the market for at least 12 months and have a minimum
derivatives market. credit rating of A, among other requirements.

7 All CFD providers contribute to CMCF.
8 Asian Bonds Online – https://asianbondsonline.adb.org.
9 Malaysian International Islamic Financial Centre (MIFC).

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