ENHANCING LOCAL ETF ECOSYSTEM
Recommendations from high-level task force to be implemented by year-end, says SC
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.