Bursa Malaysia revamps participantship structure for Derivatives Clearing BHD

Bursa Malaysia Berhad today announced it has made amendments to the Rules of Bursa Malaysia Derivatives Berhad (BMD) and the Rules of Bursa Malaysia Derivatives Clearing Berhad (BMDC) in relation to the revamp of the participantship structure for BMDC. This is to enhance the attractiveness and competitiveness of the Malaysian derivatives market and to facilitate market development.

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.

Bursa Malaysia Chief Executive Officer, Datuk Seri Tajuddin Atan, said:

This is an opportune time for Bursa Malaysia to further enhance the participantship structure to attract new intermediaries, including big financial institutions, to participate in the clearing of contracts traded on BMD. As Malaysia looks towards becoming a leading market in ASEAN, the revamp of the participantship structure is an important change to facilitate further growth and development of our derivatives market.

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 our 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.

On the overall performance of the derivatives market, Datuk Seri Tajuddin Atan added:

There is clear indication that demand for derivatives contracts has heightened as evidenced in the first three months of 2017 where the Average Daily Contracts for the derivatives market increased by 7.3 percent to 62,076 contracts. This is driven largely by an increase in the trading activities of the Crude Palm Oil Futures Contract and FTSE Bursa Malaysia KLCI Futures Contract. We anticipate that participation will continue to grow as industry players subscribe to futures and options contracts to manage their risk. Bursa Malaysia will continue to improve the derivatives ecosystem to create a vibrant and sustainable capital market.

The amendments to the Rules of BMD and the Rules of BMDC on the revamped participantship structure have been approved by the Securities Commission Malaysia.

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Bursa Malaysia revamps participantship structure for Derivatives Clearing BHD

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