Malaysia plans to launch alternative trading system

31 October 2017   Category: News, Asia, Global, Malaysia   By Goh Thean Eu

Malaysia will launch an alternative trading system (ATS) to stimulate the capital market, Prime Minister Najib Razak says.

Mr. Najib, who is also Malaysia’s Finance Minister, unveiled the plan in the 2018 federal budget, which he tabled in Parliament on October 27.

The ATS – variously known as multilateral trading facilities, electronic communication networks, cross networks, dark pools or call networks – is a non-exchange trading venue that matches buyers and sellers, and finds counterparties for transactions. 

“The ATS will be introduced subject to compliance to all requirements and regulatory standards. This will enable efficient transactions,” Mr. Najib said in his budget speech.  

He did not provide further details, including the launch date and the entity that will operate the ATS.

According to a Kuala Lumpur-based fund manager, the ATS would allow investors to trade large blocks of shares outside of the regular stock exchange, “a practice that could otherwise skew the market price in a particular direction”.

“While the industry needs more clarity and details of the launch of ATS, in general, the beneficiaries of this measure will be the financial software providers,” the fund manager tells Asia Asset Management on condition of anonymity. “Meanwhile, stock exchange operator Bursa Malaysia Securities may be on the losing end, as the emergence of ATS may result in lower margins in the long term due to competitive pressure.”

Other budget measures include a three-year tax exemption on stamp duties for contract notes for the sale and purchase of exchange-traded funds (ETFs) and structured warrants, beginning January 2018.  

This is expected to lower the cost of investment for ETFs and warrants, and boost trading volumes and activity, Chan Ai Mei, chief marketing and distribution officer at Affin Hwang Asset Management, tells AAM.

“We are encouraged by this move and hopefully [it will] spur ETF issuance and the development of the ETF market,” Ms. Chan says.

Mr. Najib also said the government will allocate 1.5 billion ringgit (US$353 million) under Syarikat Jaminan Pembiayaan Perniagaan (SJPP) – a Ministry of Finance-owned company that manages guarantee schemes – to allow companies to obtain up to 80% financing guarantee by using intellectual property as collateral.