EN­HANC­ING LO­CAL ETF ECOSYS­TEM

Rec­om­men­da­tions from high-level task force to be im­ple­mented by year-end, says SC

New Straits Times - - Business -

AMIR HISYAM RASID KUALA LUMPUR bt@me­di­aprima.com.my

MALAYSIA’S ex­change traded fund (ETF) in­dus­try is set to be­come more vi­brant with the po­ten­tial in­tro­duc­tion of a few key ini­tia­tives.

A high-level task force chaired by the Se­cu­ri­ties Com­mis­sion (SC) rec­om­mended sev­eral mea­sures aimed at en­hanc­ing the ETF ecosys­tem.

The var­i­ous ini­tia­tives and rec­om­men­da­tions would be im­ple­mented by the year-end, said the SC.

“The SC will work with the rel­e­vant stake­hold­ers to im­ple­ment these mea­sures and de­velop a more vi­brant ETF mar­ket that pro­vides greater op­por­tu­ni­ties and op­tions for in­vestors and is­suers as well as pro­motes greater par­tic­i­pa­tion in the Malaysian cap­i­tal mar­ket,” it said yes­ter­day.

The task force com­prises Bursa Malaysia, fund man­agers, mar­ket mak­ers and in­sti­tu­tional in­vestors.

“The ob­jec­tive of the task force is to spur sus­tained de­vel­op­ment and com­pet­i­tive­ness of the Malaysian ETF mar­ket by cap­i­tal­is­ing on the strong growth trends and po­ten­tial of the global ETF in­dus­try,” the SC added.

In its ef­forts to at­tract more is­suers and en­cour­age the is­suance of ETFs, the task force rec­om­mended the low­er­ing of min­i­mum cap­i­tal re­quire­ment for the ETF is­sue from RM10 mil­lion to RM2 mil­lion.

Other mea­sures in at­tract­ing more ETF is­suances in­clude re­mov­ing the re­quire­ment for sub­mis­sions by the prin­ci­pal ad­vis­ers and re­duc­tion in time to mar­ket the is­suance process.

The task force also rec­om­mended the broad­en­ing of the ETF’s dis­tri­bu­tion chan­nels by per­mit­ting fi­nan­cial in­sti­tu­tions, on­line plat­forms and fi­nan­cial plan­ners to of­fer ETFs to clients via stock­broking com­pa­nies.

“The use of such al­ter­na­tive dis­tri­bu­tion chan­nels will pro­vide in­vestors greater ac­cess to a more di­verse range of prod­ucts at a lower en­try cost,” it said.

In en­cour­ag­ing prod­uct in­no­va­tion, SC said the in­tro­duc­tion of new types of ETFs, in­clud­ing fu­tures-based and con­ven­tional com­mod­ity-based ETFs, would be fa­cil­i­tated.

“This will pro­vide af­ford­able en­try points for re­tail­ers in tra­di­tion­ally dif­fi­cult-to-ac­cess in­vest­ments,” it said.

Recog­nis­ing the im­por­tant role of mar­ket-mak­ers in the ecosys­tem in pro­vid­ing liq­uid­ity to trad­ing ETFs, the SC and Bursa Malaysia will be pro­vid­ing re­bates and waiv­ing fees ap­pli­ca­ble to the ETF mar­ket-mak­ers.

This in­cludes a 100 per cent clear­ing fee re­bate by the SC and Bursa Malaysia.

ETFs are synthetic rein­vest­ment prod­ucts that re­flect un­der­ly­ing stocks, bonds, or other in­stru­ments.

Other than its low cost ben­e­fit, ETF pro­vides ex­po­sure to a bas­ket of se­cu­ri­ties in a sin­gle trans­ac­tion and is an ef­fi­cient way to gain re­gional and in­ter­na­tional di­ver­si­fi­ca­tion.

Ex­am­ples of the lo­cal ETFs are FTSE Bursa Malaysia KLCI ETF, which tracks the lo­cal key bench­mark in­dex, and CIMB FTSE/ Asean 40 ETF, which tracks the un­der­ly­ing in­dex con­sist­ing of the 40 largest com­pa­nies by full mar­ket value listed on stock ex­changes of Indonesia, Malaysia, the Philip­pines and Sin­ga­pore.

PIC BY ASYRAF HAMZAH

Bursa Malaysia is part of a task force chaired by the Se­cu­ri­ties Com­mis­sion that rec­om­mended sev­eral mea­sures aimed at en­hanc­ing the ex­change traded fund ecosys­tem.

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