Market infrastructure - Malaysia
Institutions and organisation
Stock Exchange - Bursa Malaysia Berhad (Bursa Malaysia)
The former Kuala Lumpur Stock Exchange was demutualised in January 2004 and converted from a company limited by guarantee into a public company limited by shares. In April 2004, the company changed its name into Bursa Malaysia Berhad (Bursa Malaysia). Bursa Malaysia is the exchange holding company that operates three core businesses (exchange operations; clearing, settlement and depository operations; and information services) run by various subsidiary companies:
- Bursa Malaysia Securities Berhad (Bursa Securities)
Bursa Securities is the exchange operator. Bursa Malaysia’s shares became listed on Bursa Securities’ Main Board in March 2005. Bursa Securities facilitates trading of listed securities and is responsible for market surveillance and the enforcement of trading rules and of listing requirements.
Securities dealing is carried out by stockbroking companies (SBCs), which are referred to as “Participating Organisations” of the Bursa Securities. Bursa Securities has four boards:- Main Board;
- Second Board;
- ACE (Access, Certainty, Efficiency); and
- LEAP (Leading Entrepreneur Accelerator Platform)
A public company that has its shares listed on the Main/ Secondary Board must comply with the listing requirements of Bursa Securities Main/ Second Board, while ACE counters must comply with the listing requirements of the ACE Market and counters listed in the LEAP must comply with the LEAP market requirements.
Bursa Malaysia Securities Clearing Sdn Berhad (Bursa Clearing (S))
Trades executed on Bursa Securities by licensed SBCs are cleared through Bursa Clearing (S), a wholly owned subsidiary of Bursa Malaysia. Bursa Clearing (S) also operates an against payment service, called the Institutional Settlement Service (ISS), that facilitates DVP settlement among custodians and between SBCs and custodian banks.
CSD - Bursa Malaysia Depository Sdn Berhad (Bursa Depository)
Bursa Depository is 75% owned by Bursa Malaysia with the remaining 25% owned by ABM-MCD Holdings Sdn. Bhd. All securities held at Bursa Depository are formally held by a wholly owned subsidiary, the Bursa Malaysia Depository Nominees Sdn Bhd, known in legal terms, as a “bare trustee”.
All investors, whether individual or corporate, trading via Bursa Securities are required to open an account, which they do through the following types of institution:
- ADAs - member companies of Bursa Securities (for example SBCs);
- ADMs - commercial and merchant banks (for example, custodians).
Central Bank - Bank Negara Malaysia (BNM)
In addition to conventional central bank functions and activities, covered under the Central Bank of Malaysia Act 2009, BNM is also entrusted with the role of administering and implementing the Financial Services Act 2013 and the Islamic Financial Services Act 2013, which governs all commercial banks (conventional and Islamic), including those providing custodial services.
The Real-Time Electronic Transfer of Funds and Securities System (RENTAS) is the country’s interbank payment system. RENTAS is wholly owned by BNM. Day-to-day operations of RENTAS is managed by PayNet (which is jointly owned by BNM and several local banks).
Malaysian government securities, quasi-government securities and private debt securities are traded on the over-the-counter (OTC) market and are deposited and settled via a sub-system within RENTAS known as the Scripless Securities Depository System (SSDS). Securities settled via SSDS are dematerialised in BNM.
Regulatory structure
The Companies Commission of Malaysia (CCM)
The CCM has powers of administration and enforcement of the Companies Act 2016, Trust Companies Act 1949, Kootu Funds (Prohibition) Act 1971, Business Registration Act 1965 and all subsidiary legislation enacted under these Acts.
The Securities Commission (SC)
The SC was set up under the Securities Commission Act 1993. Its main function is to regulate the securities and futures industries and to advise the Minister of Finance on all related matters. The SC is composed of nine members appointed by the Minister of Finance, four of which represent the Malaysian Government.
The SC serves as an “oversight regulator” and supervises Bursa Malaysia and the compliance of brokers and listed companies. Together with Bursa Malaysia, the SC provides structure to the securities industry; any proposed amendments to the regulations would require their prior approval.
With the amendments to the Securities Commission Act 1993 effective 1 November 1998, the powers of the SC have been broadened to give them authority to examine documents in the normal course of operations instead of during official investigations only.
The Licensing Officer
The Licensing Officer is appointed by the Minister of Finance and supervises the issuance of relevant licences under the Securities Industry Act 1983 and the Futures Industry Act 1993.
The Foreign Investment Committee (FIC)
Formed in 1974, the FIC implements government guidelines to regulate the acquisition of assets or interest, mergers or takeovers of companies and businesses, and is responsible for major foreign investment issues (both onshore and offshore).
Law and regulations
The Malaysian securities industry is regulated by the following laws:
- Companies Act 2016;
- Securities Industry Act 1983;
- Securities Industry (Central Depositories) Act 1991;
- Securities Commission Act 1993;
- Securities Industry (Central Depositories) (Foreign Ownership) Regulations 1996;
- Securities Industry (Reporting of Substantial Shareholding) Regulations 1998;
- Central Bank of Malaysia Act 2009
- Financial Services Act 2013 and the Islamic Financial Services Act 2013