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1.3.2 EXPANDED REGULATORY FRAMEWORK AS THE MARKET EVOLVED
The evolution of markets in the last decade saw the emergence of alternative platforms or marketplaces that have redefined the intermediation process between investors and issuers. Given that these new business models have different risk profiles compared to the public markets in Malaysia, the SC introduced a risk-based regulatory approach with the RMO regime to facilitate and supervise their development. At the same time, systemically important market structures or approved exchanges were held to higher standards to maintain market integrity. Steps were taken to better govern key financial market infrastructures that clear, settle and function as a central depository. This includes the issuance of the Guidelines on Financial Market Infrastructures (FMIs) to bring FMIs in line with the IOSCO’s principles.
Bursa Malaysia’s discharge of its regulatory duties was assessed annually, together with its governance practices, market surveillance, supervision and cyber security risk management. This has laid the foundation for the establishment of a regulatory subsidiary to further enhance its governance structure and address potential conflicts of interest. When completed, this will place Malaysia’s exchange regulatory framework in line with other jurisdictions such as Singapore and Japan.
With technological advancements, markets have seen increased sophistication in trading dynamics and greater demand for direct market access, automated trading and proprietary trading. Regulatory guidelines, rules and reporting obligations were enhanced to facilitate and govern the growth of trade execution services amid greater trading vibrancy.
Since the start of the decade, global efforts focused on enhancing the strength of market institutions and enacting greater transparency for over-the-counter (OTC) transactions. As the domestic capital market matured, legislative amendments were enacted to safeguard the enforceability of netting provisions for contracts. The introduction of a framework for OTC CFD, which required investors to trade only with licensed CFD intermediaries, facilitated better transparency and management of OTC risks.
1.3.3 EXPANDED ACCOUNTABILITIES WITH GREATER DIVERSITY IN INTERMEDIATION AND PRODUCT RANGE
The growth and diversity of intermediation services and products thrived under a facilitative regulatory regime that recognised the twin importance of innovation and accountability. This entailed progressive legislative amendments and robust governance arrangements to ensure market participants exercise appropriate duty of care for their customers and actions.
To strike an optimal balance between innovation and regulation, the SC adopted the principle of proportionality for liberalisation measures and the rationalisation of regulatory frameworks. Progressive liberalisation of rules and guidelines allowed for the entry of fully foreign-owned intermediaries in different market segments, while the decoupling of existing arrangements – including derivatives clearing and trading – and increased outsourcing of non-core functions facilitated new business models.
The rationalisation of regulatory frameworks was undertaken in line with growing market maturity. This included the establishment of the Lodge and Launch (LOLA) platform, which allowed for a quicker time to market for wholesale products for sophisticated investors, with post-lodgement reviews being conducted afterwards. The ease of doing business was improved with a more cost-effective regulatory
28 SECURITIES COMMISSION MALAYSIA