Bursa Malaysia improves ETF frameworks to spur growth


BURSA Malaysia Bhd has made several amendments to the exchange-traded fund (ETF) framework under the Main Market Listing Requirements and Bursa Malaysia Securities Bhd to spur the growth of ETF industry in Malaysia.

The key ETF amendments that will be made effective next year include loosen the interim reporting frequency from quarterly to semi-annual basis, enhance its interim and annual reports contents, enhance the immediate announcement requirements to offer greater transparency on information pertaining the index or benchmark, introduce qualifying criteria for investors trading in leveraged and inverse ETFs, and expand the permitted short selling (PSS) framework, which allows the short sell of new ETF types.

The amendments will be effective beginning Jan 2, 2019. According to Bursa, currently under the PSS framework, short-selling is only applicable to equity-based ETFs.

Bursa Malaysia CEO Datuk Seri Tajuddin Atan said the introduction of ETF products is a welcome development for its ETF market and should lead a more vibrant ETF ecosystem.

“The resulting enhancements to the framework complements our ongoing market development initiatives to provide an efficient and effective ecosystem for ETFs, as well as diversified product range for our investors,” he said in a statement last Friday.

The Securities Commission of Malaysia (SC) also issued revised guidelines on ETF on Nov 26, 2018, which is part of the efforts by the Exchange and the SC to develop the ETF market’s potential.

With the revised guidelines, a wider variety of ETFs such as futures-based ETFs, synthetic ETFs, physical commodity ETFs and smart beta ETFs is expected to be issued.

Among the objectives of the ETF framework are to promote greater business efficacy and reduce compliance cost by ETFs, facilitate the industry’s growth while enhancing investor protection and transparency, and facilitate market-making activities for the industry via the PSS framework.

Tajuddin added that in tandem with the market development, the exchange is focusing on investor awareness and education in order to nurture the industry.

“To further build on the growing demand from investors for passive investing instruments, we will intensify our nationwide roadshows and education programmes that seek to give them the ability to build a diversified portfolio that can place them in the best position for long-term financial success,” he said.

Over the last two years, the exchange has reached out to over 15,700 investors through 165 ETF workshops and seminars.

The Malaysian Reserve previously reported that investors lacked awareness of the ETF industry, due to the lack of distribution channels and the funds’ timing for debuts.

An ETF is a fund that comprises a basket of stocks, bonds or commodities, with performances closely tracking the market index it is benchmarked against.

As of April 2018, there were 10 ETFs listed on Bursa Malaysia with a collective fund size of RM1.95 billion.