Southeast Asia’s emerging market nation, Malaysia, plans to enhance its financial markets landscape for domestic investors. The country’s main bourse, Bursa Malaysia, has issued a public consultation paper which aims to set new standards for the growing stock exchange among domestic investors.
The Public Consultation Paper, issued by the bourse, is to seek public feedback on the proposal to simplify the requirements on the opening of trading and securities accounts for individual investors. The move highlights the contribution of technology to the governance of emerging market stock markets as they look to compete with developed markets.
Emerging market stock exchanges have been gradually embracing new technologies in the way they operate their trading framework, however, with policies still in their infancy many have been slow in maintaining full e-trading solutions across the board, from client onboarding to trade reporting. Malaysia’s stock exchange, Bursa Malaysia, aims to rid users of setting up accounts with extensive paperwork requirements.
Members of the exchange, Participating Organisations (POs) and authorised depository agents (ADAs) of the Exchange request new users to provide notarised documents, that are to be submitted in person.
Replicating E-based Account Opening in FX & CFDs
The developments proposed by the exchange replicate those common in the spot FX markets. Global traders have been used to setting up accounts with FX brokerage firms with simple account opening procedures. Firms based in highly regulated countries such as Switzerland or the UK have the toughest measures, however the UK’s financial watchdog has simplified the account opening procedures for clients categorised as high-risk by requesting one identification document for deposits of ten thousand euros or less.
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FX and CFD providers use sophisticated verification software that assists their account opening units to fast-track client onboarding process, such as GB Group and Experian, the software is connected to government databases which checks against individual credit scores, similar to checks carried out by banks and financial service firms.
The new proposals by the Bursa Malaysia will mean that clients will set up new accounts by completing the relevant account opening form and submitting the details to the PO and ADA along with the appropriate supporting documents (ID and address proof), in hard or soft copy (for example via electronic means) without the need to submit the form in person or sign it before any acceptable witness or notary.
FX Trading in Malaysia
Malaysian investors were attracted to the leveraged FX marketing during the midst of the financial crisis of 2008. Forex Magnates’ research indicates that a large number of Malaysian investors engaged in FX markets either through education, demo trading or holding a live account. In 2010, the country’s central bank created hurdles for private investors to send funds overseas to FX brokers. Spot FX is not regulated by the financial regulator. The exchange launched its first metals futures contract in October 2013.
Bursa Malaysia has been strengthening its financial markets structure as it competes with regional rivals, Vietnam, Thailand and Indonesia as a regional financial centre alongside Singapore. In 2010, the bourse launched its business sustainability programme, speaking about the new concept, the exchange’s Chairman, pictured, Tun Mohamed Dzaiddin Haji Abdullah, commented in a statement: “Bursa Malaysia’s Business Sustainability Programme for Corporate Malaysia is an integral element in building a capital market of quality and integrity. We seek to encourage Malaysian companies to be more mindful of their business conduct vis a vis their multifarious stakeholders.”