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Development Initiatives to Enhance Market Liquidity and Accessibility

Ref No : 15/19/03 16 May 2019 Embargo : Not for publication or broadcast before 1200 hours on Thursday 16 May 2019

Bank Negara Malaysia (BNM) continually undertakes initiatives to broaden and deepen the Malaysian financial market. As part of these ongoing initiatives, BNM actively engages market participants to identify measures to promote a conducive and vibrant market environment that is supportive of domestic economic activities.

In line with this, BNM is pleased to announce further development initiatives aimed at improving market efficiency, accessibility and liquidity in the domestic financial market, whilst preserving an orderly and transparent onshore financial market.

  1. Enhancements to repo market liquidity and flexibility

    Recognising the important role of the repo market in secondary market trading activities, BNM will further increase the availability of off-the-run bonds to be borrowed via repo for market-making activities. The repo guideline will be reviewed accordingly to allow, amongst others, extending the repo tenor beyond 1 year.

  2. Physical delivery for MGS futures

    To further develop an effective hedging platform for investors, BNM, in collaboration with Securities Commission Malaysia, Bursa Malaysia and key market players will further enhance the delivery mechanism for MGS futures settlements.

  3. Expansion of dynamic hedging programme to include trust banks and global custodians

    The dynamic hedging programme, introduced in December 2016, provides an avenue for non-resident investors to actively manage their FX exposures onshore. To date, the programme has 88 registered investors managing a total of USD30.8 billion in assets. To further enhance onshore market liquidity and accessibility, trust banks and global custodians can now apply under the programme to undertake dynamic hedging on behalf of their underlying clients.

  4. Increased flexibility for dynamic hedging programme participants to manage FX risks

    To facilitate the management of FX risk, taking into account institutional investment profiles, registered institutional investors can enter into forward contracts to buy ringgit beyond the current 25% (of underlying assets) threshold upon approval by BNM. Applications can be submitted to

  5. Simplified FX transaction and documentation process

    To ease investors’ accessibility to the onshore FX market, FX transaction and documentation processes will continue to be improved and simplified. In this respect, a standard documentation guide for FX transactions has been developed by the industry and will be circulated via the Association of Banks Malaysia (ABM) for reference by market participants.

  6. Ringgit liquidity beyond local trading hours

    The Appointed Overseas Office (AOO) framework which was expanded in 2016 serves to facilitate greater access to the Malaysian financial market by enhancing the provision of ringgit liquidity beyond the local trading hours. Currently, there are 156 AOOs from 21 banking groups operating in 36 countries. BNM will continue to facilitate the market-making capacity of AOOs to ensure sufficient access to ringgit prices.

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Bank Negara Malaysia
16 May 2019

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