SC introduces clearing as a new regulated activity

KUALA LUMPUR: Securities Commission Malaysia (SC) has introduced amendments to its regulatory framework to include clearing for securities and derivatives as a new regulated activity.
This framework will decouple clearing and trading functions into two distinct regulated activities, allowing intermediaries to specialise in their niche services. The entrance of new stand-alone execution and clearing intermediaries, including foreign owned entities, will transform the competitive dynamics of the capital market, and enhance cost efficiency for trading and clearing activities. 
The operationalisation of the new framework will take a phase approach, starting with the derivatives market, given the readiness of its market infrastructure to cater to a wider intermediary segment.
In addition, the SC is also broadening the framework for marketing representatives across all regulated activities. These marketing representatives will be able to refer clients to their principals within the permissible parameters, provided in the guidelines for marketing representatives.
This framework is in line with SC's effort to enhance business opportunities of licensed intermediaries and facilitate access to a wider client base.
Meanwhile, Bursa Malaysia Bhd has amended the rules of Bursa Malaysia Derivatives Bhd (BMD) and the rules of Bursa Malaysia Derivatives Clearing Bhd (BMDC) in relation to the revamp of the participantship structure for BMDC.
Under the revamped participantship structure, BMDC has decoupled clearing participantship from trading participantship to allow for standalone clearing participants. This structure enables large and well-capitalised financial institutions to come into our market as
standalone clearing participants and provide third party clearing, which in turn promotes accessibility of our market to traders globally.
Some of the initiatives already implemented include BMD's strategic alliance with Chicago Mercantile Exchange, enhancement of technological infrastructure to improve accessibility and visibility with the migration of BMD products onto the Globex trading platform, launch of the new Derivatives Clearing System, and creation of a single trading right to enable derivatives brokers to trade all classes of BMD products.
The introduction of the new clearing-only function will promote specialisation among intermediaries based on their capabilities. This initiative is in line with the national aspirations under the Capital Market Masterplan 2 (CMP2) to increase intermediation efficiency and scope through fostering a conducive environment for innovation, facilitating greater diversity and expanding growth prospects across the value chain.
Consistent with the CMP2 strategy, the participantship structure of BMDC has been revised to separate trading and clearing participantship, thus allowing derivatives market intermediaries further flexibility to leverage on their competitive strengths in managing the costs of their operations.
Following the revamp of the participantship structure, the application fees for trading participants and associate participants of BMD have been abolished. The registration fee (formerly known as admission fee) for trading participants of BMD has been reduced from
RM100,000 to RM50,000 to be on par with the registration fee for general clearing participants of BMDC.
Moving forward, there will be three different categories of intermediaries, namely full-fledged derivatives brokers, providing both trade execution and clearing services; executing derivatives brokers, providing only trade execution services; and standalone clearing participants, providing only clearing services.