Malaysia modifies SBL rules amid rising volumes

Malaysia modifies SBL rules amid rising volumes

Malaysia’s stock exchange has revised rules around short selling and securities lending in an attempt to boost price flexibility and market liquidity.

A modified tick rule will allow short sales to be executed at the best current asking price or higher, officials at Bursa Malaysia said on Monday.

In addition, investors will be able to borrow securities for the settlement of potential failed trades rather than be subject to a buying-in process.

"Using this facility, investors can now mitigate the costs of genuine trade errors in the market," a statement read.

The rule amendments have been approved by the Securities Commission Malaysia.

Malaysia is the seventh largest market in Asia Pacific in terms of equity lending revenues, according to IHS Markit data. Revenues jumped 40% over in 2016.

Although the total remains low by regional standards at $32m it is over 10 times that generated five years ago.

Bursa Malaysia offers two securities borrowing and lending (SBL) models: central lending agency (SBLCLA) and negotiated transaction (SBLNT).

The SBL-CLA model sees the bourse act as the central lending agency for all SBL transactions between authorised lenders and borrowers.

SBL-NT provides an on-shore route to agree transactions an over-the-counter basis and report to its representatives.

Datuk Seri Tajuddin Atan, Bursa Malaysia’s chief executive, said this week that there is a “clear indication” of growing market interest in the exchange's regulated short selling (RSS) and SBL mechanisms.

“We anticipate that participation will continue to grow as the exchange further enhances Bursa’s RSS and SBL facilities to be in line with developed markets,” he added.

“As Malaysia looks towards becoming a leading market in The Association of Southeast Asian Nations (ASEAN), RSS and SBL-NT are some of the important market mechanisms that we look to continually improve and enhance on."

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