Chief Executive Officer's Message

Dato' Yusli Bin Mohamed Yusoff
Chief Executive Officer

1. Securities Market

1. Our securities markets progressed steadily throughout 2010. The benchmark FBM KLCI opened 2010 at 1,272.78 points and advanced by 19% to close the year at 1,518.91 points, having hit an all time high of 1,528.01 points on 10 November 2010. The FBM Top 100 and the FBM EMAS indices performed in a similar manner, with both hitting all time highs on 22 November 2010, but the FBM ACE index (formerly known as the FBM MESDAQ) finished the year up by only 1% at 4,347.56 points.
   
   On the back of strong final quarter performance, the specialist palm oil indices introduced in 2009 did well. The FBM Palm Oil Plantation index ended the year up by 33% at 21,537.66 points, with the regional USD and Malaysian Ringgit denominated FBM Asian Palm Oil Plantation indices up by 28% at 21,587.57 points and 15% at 23,128.52 points respectively.
   
   Interest in the Shari'ah indices, FBM Hijrah Shariah and FBM EMAS Shariah, was sustained, but at a marginally lower level than the overall market.

1. Market capitalisation advanced strongly, crossing the RM1 trillion threshold on the first trading day of 2010, and rounded off the year by growing by some 28% over the year. IPO activity contributed to a strong year-end boost in overall market values.
   
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   Compared with 2009, average daily trading values increased by 29% to reach RM1.6 billion even though the average daily trading volume only increased by 2% in 2010. With market capitalisation growing at a faster pace than the growth of value traded, there was a statistical decline in overall market velocity to 33%.

1. New issue excitement returned to our markets in 2010, in line with the stronger economy and generally improved sentiment. There were 29 IPOs, including two REITs in 2010, compared with 14 in 2009. Secondary issues also gathered pace, with a total of 77 rights and bonus exercises being conducted during the year, compared with 52 in 2009.
   
   In terms of market demographics, foreign investors remained more or less constant at 22% by value of shareholding, while trading participation stood at 27%. Institutional funds dominated the market with a 73% share compared with 27% for retail investors.

2. Derivatives Market

1. Our derivatives markets operated at lower activity levels in the first nine months of 2010. This was largely a result of the relatively narrow spread between the futures and physical markets which applied for much of the period. However, with a return of volatility and better spreads, activity levels picked up noticeably in the final quarter of the year.
   
   In the month of November, FCPO contracts recorded an all time high of 451,843 contracts traded, passing the previous record of 442,220 contracts in April 2009. Daily contract volume touched a record high of 41,879 contracts on 18 November, surpassing the previous record of 37,231 recorded on 13 June 2007.
   
   Overall, the total number of contracts for 2010 grew marginally by 0.3% from 6.14 million in 2009 to 6.15 million in 2010. Average daily volume increased correspondingly from 24,749 contracts in 2009 to 24,818 contracts in 2010. Open positions improved 7.3% from approximately 123,000 contracts in 2009 to 132,000 contracts in 2010.
   
   Total annual volume traded for FCPO contracts was 4.1 million contracts, slightly higher compared to the previous year of 4.0 million contracts, or the equivalent of just above 100 million metric tons of CPO. The daily average number of FCPO contracts increased marginally from 16,165 contracts in 2009 to 16,389 contracts in 2010, primarily as a result of the narrower trading range for CPO for the first 9 months of the year between RM2,270 to RM2,755 or a range of RM485 per metric ton. The prices of CPO started to pick up from October onwards, in line with other global commodities, trading from RM2,653 to a high of RM3,792 or a price range of RM1,139 per metric ton.
   
   FKLI futures activity in 2010 was similar to 2009, with 2.0 million contracts traded and the daily average number of contracts was approximately 8,000. There was reduced volatility in the underlying index for the first seven months of the year ranging from 1,220 to 1,364 points, after which it started trending upwards from August onwards from 1,364 to a high of 1,546 points.
   
   KLIBOR futures traded a total of 95,477 contracts in 2010 as compared with126,690 contracts in 2009, which was lower by 25%.
   
   From a market demography perspective, the participation of foreign players, both individuals and institutions, has improved markedly. For FCPO contracts, foreign participation grew from 19% to 25% over the year, while for FKLI contracts there was an increase from 26% to 33%. This is a positive signal and provides early signs of validation for the globalisation path Bursa Malaysia has chosen for its derivatives business.

3. Islamic Markets

1. The capital market plays a significant role as a source for fund raising by all companies, including those that follow Islamic principles. Bursa Malaysia currently hosts 842 Shari'ah compliant securities representing 88% of total listed securities, with market capitalisation amounting to RM800 billion at the end of 2010. In terms of trading volume, Shari'ah compliant securities accounted for 160.74 billion units or 64% of total units traded in 2010.

1. In line with the national aspiration to establish Malaysia as a pre-eminent international Islamic financial centre, we launched initiatives to promote the listing of sukuk in both Malaysian Ringgit and foreign currencies on Bursa Malaysia, and the establishment of a Shari'ah compliant commodity trading platform. Along with several other initiatives, these measures are already proving to be a new and reliable contributor to our primary income streams at Bursa Malaysia, and will continue to increase in importance in the years ahead.
   
   Following our maiden sukuk listing in August 2009, I am glad to report that we remain the top sukuk listing destination in the world, with a total of USD27.7 billion of sukuk programmes listed. Even more pleasing is the fact that we have managed both to create greater visibility for domestic sukuk issuers, as well as enhance our international appeal, with several foreign sukuk issuers seeking to list on our main market. The largest foreign issue to date was the November 2010 listing of the Islamic Development Bank's USD3.5 billion sukuk programme, which capped a year that saw seven new sukuk issues from seven issuers, raising a total of some USD9 billion.
   
   In addition to the sukuk market, I am pleased to report further developments in our Islamic commodity trading platform, Bursa Suq Al-Sila'. We now have 33 members trading through this platform encompassing both domestic and foreign financial institutions (including those domiciled in the GCC), along with commodity suppliers. The establishment of Bursa Suq Al-Sila' represented an entirely new business for any exchange, and the fact that others are now attempting to emulate our success is a compliment.

4. The Labuan International Financial Exchange

1. LFX recorded six new listings in 2010, bringing the total number of listed instruments to 28. The most significant listing was the USD1.25 billion '1Malaysia Sukuk' issued by the Malaysian Government, which was listed on 8 June 2010. The market capitalisation of the LFX stands at USD19.2 billion at year end 2010.

1. In a move to boost market activity on LFX, a revision was made in November of the entry level for a licensed Listing Sponsor from the previous Minimum Net Assets requirement of USD2 million to a lower threshold of USD100,000. The revision is designed to attract greater participation by issuers on LFX and will encourage more entities to apply for a Listing Sponsor license. As a measure to enhance efficiency, the LFX has also undertaken to improve the turnaround time for approval of listing applications to two market days, from the previous seven days.

1. Operating Revenue

1. RM331 million; +11%

1. Operating revenue comprises trading revenue from the securities and derivatives markets, stable revenue and other operating revenue.
   
   Trading revenue from the securities market grew by 21% to RM168 million in 2010. Trading activity improved from a daily average value of RM1.22 billion per day in 2009 to RM1.57 billion per day in 2010. The growth in trading revenue was offset to some extent by the lower effective clearing fee rate of 2.38 basis points in 2010 compared with 2.51 basis points in 2009.
   
   Trading revenue from the derivatives market was fairly stable at RM38 million. The marginal increase in contracts traded in 2010 (2010: 6.15 million vs. 2009: 6.14 million) brought about a 0.6% increase in trading and clearing fees. Guarantee fees however declined by RM1 million as a result of lower average daily open positions in 2010.
   
   Stable revenue increased by 4% to RM108 million in 2010. This is attributed to the higher number of IPOs, structured warrant listings and secondary issues in 2010 compared with 2009.
   
   Other operating revenue increased by 7% to RM18 million in 2010. This is mainly due to processing fees derived from the transfer of certain functions from the SC to Bursa Malaysia in the second half of 2009.

2. Operating Expenses

1. RM197 million; +8%

1. Higher expenses in 2010 were largely due to our efforts to recruit and retain talent, and the migration of our derivatives products from BTD onto CME Globex® on 20 September 2010. Moving towards the migration date, we shortened the useful life of BTD and, thus, accelerated depreciation of the system. We now pay a license fee for the trades done on CME Globex®.
   
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3. Capital Expenditure

1. RM22 million; unchanged

1. We spent RM22 million in 2010 mainly for system and infrastructure development. We started the year by focusing on developing the derivatives infrastructure which would link our brokers to CME Globex®. We then moved to revamping our derivatives clearing system towards the end of the year. The work on this is still ongoing. In addition, we worked on streamlining our internal infrastructure to create greater value and efficiency.

4. Cash flows

1. Net increase in cash RM114 million

1. The higher cash flows from operating activities were in line with higher operating profits generated in 2010. During the year, we also converted more of our short term investments into cash, resulting in a net increase in cash from investing activities. Cash used in our financing activities was higher following the greater quantum of dividends paid in the year.

5. Rewarding Shareholders

1. Total dividend of 20 sen per share

1. This year, we paid an interim dividend of 9.5 sen per share and propose 10.5 sen per share as our final dividend. This will bring total dividends to 20 sen per share for the year, representing a payout of 94% of our FY2010 profits to our shareholders.

1. New Issue Activity

1. Although recovery of the global economy remained sluggish, the combined effects of relatively robust domestic economic growth and the Government's stimulus packages proved to be a catalyst for greater IPO activity in 2010 from a variety of sectors. For the year, there were 29 IPOs, up 107% from 2009. Our IPOs raised a total of RM20 billion compared with RM12 billion in 2009, an increase of 65%. With the new listing framework, we also saw more ACE Market listings compared with 2009, with the number of ACE Market IPOs increasing from 2 to 6.
   
   The most notable new listing was by PETRONAS Chemicals Group Berhad, which successfully raised some RM13 billion, and was the largest issue in South East Asia. In line with current investor demands for high-yielding lower risk assets, we saw the listings of two REITs, namely Sunway Real Estate Investment Trust, our largest REIT todate, and CapitaMalls Malaysia Trust.
   
   Although the number of secondary capital issues increased, the amount of capital raised declined marginally from RM16 billion in 2009 to RM13 billion in 2010.
   
   Funds raised by our PLCs continued its momentum as the equity capital market remained a viable source of funding. There were also a total of 204 newly listed structured warrants in 2010 compared with 124 in 2009.

2. New ETFs

1. The Malaysian ETF market achieved another milestone with the listing of two ETFs in July 2010, namely the CIMBA40 and the CIMBC25. Both issues were firsts for Bursa Malaysia, with the CIMBA40 being the first cross-listing ETF with SGX, and the CIMBC25 ETF the first foreign ETF. These funds provide choice for investors who have a lower risk appetite but wish to increase their exposure to ASEAN and Chinese markets and tap into some of the strongest assets in China and in the region.
   
   Our efforts to educate and raise awareness of the benefits of ETFs will continue as we push to attract foreign denominated ETFs to be listed on the Main Market. The listing of foreign denominated ETFs will leverage on the multi-currency platform we introduced last year to enable investors to create better diversification as well as providing an element of hedging into their portfolios.

3. Promoting Research for Listed Companies

1. CBRS embarked on its third phase in October 2010 after a successful run since its inception five years ago. CBRS is open to participation by all companies listed on Bursa Malaysia, and is aimed at generating investor interest in under-researched stocks by providing regular research reports on the counters that are covered by the scheme. This ultimately supports the Exchange's continuous call to facilitate informed investing via wider research coverage.
   
   Over the years, CBRS has assisted listed companies understand the importance of profiling and being transparent if they are to generate greater investor awareness as well as manage investors expectations. Investors, particularly retail investors, are now savvier and more discerning, and rely on independent analysis. This is evidenced by the number of CBRS reports downloaded, which has steadily increased to some 64,000 reports per month. Through CBRS, investors can gain free access to in-depth information on the company's potential, progress and updates that allow them to make better informed investment decisions.
   
   Bursa Malaysia is committed to providing support to all issuers, particularly those with smaller capitalisation, so that they can gain investor attention and eventually create liquidity in their securities. The cost of coverage for participating companies is partially subsidised by the CMDF.

4. New Structured Warrant Product - Callable Bull Bear Certificate

1. As part of Bursa Malaysia's on-going efforts to raise the attractiveness of the Structured Warrant segment, the LR were amended in May 2010 to allow for CBBCs.
   
   CBBC is a type of structured warrant issued either as Bull or Bear certificate, with a fixed expiry date. On Bursa Malaysia, CBBCs may have a tenor ranging from three months to five years. CBBCs let investors take bullish or bearish positions on an underlying instrument. They track the performance of the underlying instrument without requiring investors to pay the full price required to own the actual instrument. A smaller capital outlay and lower transaction costs and commissions make CBBCs an interesting new alternative for investors.
   
   The first four CBBCs were listed in July 2010 and, at end-December 2010, a total of 19 CBBCs had been listed on Bursa Malaysia. From July to end December 2010, trading in CBBCs accounted for 8% (RM1.1 million) in average daily turnover value of the Structured Warrant segment on Bursa Malaysia.

5. Enhancing Efficiency through Electronic Services

1. Bursa Malaysia has an on-going programme to introduce leading edge electronic efficiencies for the benefit of investors and market participants. In 2009, the Prime Minister announced the introduction of e-Dividend to promote payment efficiency, and I am pleased to report that e-Dividend was successfully implemented in September 2010. Shareholders can now benefit from the timely receipt of dividends directly into their bank accounts, with the convenience of not having to wait for dividend cheques and the hassle of physically paying into their bank accounts. The new system also offers far greater security. Since the commencement of e-Dividend registration in April 2010, a total of 735,628 account holders representing 38% of total CDS accounts had registered for e-Dividend by end December 2010.
   
   From 1 September 2010 onwards, all PLCs that announce their book closure dates are required to effect cash dividend payments via e-Dividend to shareholders who have registered. As at end 2010, a total of 152 companies have already implemented e-Dividend.
   
   Bursa Malaysia Depository offers two services related to e-Dividend. We are the central depository of bank account information provided by CDS account holders and the service provider to listed companies in facilitating the payment of cash dividends directly into their shareholders' bank accounts.
   
   In August, the Electronic Share Payment facility for share transactions, or e-Share, was introduced by the SC, BNM and Bursa Malaysia. This facility promotes the use of e-payments in the stock market and enhances efficiency in the market's payment and settlement systems. E-Share gives investors faster access to their funds by allowing share sales proceeds to be paid on the same day directly into their bank accounts.

6. ASEAN Trading Link

1. A Memorandum of Understanding has been signed between the six established ASEAN Exchanges, including Bursa Malaysia, in which we agreed to cooperate in working towards the establishment of the ASEAN Link. All the exchanges involved meet regularly to discuss the details of implementation. The aim is to promote ASEAN as an asset class to investors globally.

1. Our Unique Partnership with CME

1. Our partnership with CME is unique and very different from that of a vendor relationship. Ours is a stakeholder relationship. CME has demonstrated strong commitment and dedication towards this venture, and our joint search for new businesses and markets has been at the forefront of our discussions and activities. There has been an efficient transfer of knowledge and skill sets to our team members and, for its part, CME has gained a better understanding and deeper appreciation of the local culture and business environment.

2. Migration to Globex®

1. On 20 September 2010, we successfully migrated all our derivatives products comprising commodity, financial and equity futures onto the CME Globex® electronic trading platform, thereby making our derivatives markets truly international.
   
   The listing of our derivative products on CME Globex®, the leading electronic trading platform for derivatives in the world, has added great value to our markets as a whole. We now have unparalleled global distribution for our derivatives products, particularly our star product FCPO contract which is the global price benchmark for the CPO market. International customers who might otherwise never have thought of investing in Malaysian derivative products now have efficient access to our markets.
   
   Meanwhile, BMD continues to operate and regulate its market. The trading hours for the Malaysian derivatives market remain unchanged, and all our derivatives contracts traded on CME Globex® continue to be cleared by Bursa Malaysia Derivatives Clearing, a subsidiary of BMD. Changes have been effected to the rules of BMD to reflect the trading features and functionalities on CME Globex®, and are now benchmarked against international best practices.

3. Our Trading Participants

1. The year started well with the introduction of LT International Futures as a new TP in December 2009. In May 2010, Interactive Futures became our 20th TP, and we aim to build on this pipeline of intermediaries, crucial to developing the critical mass and market liquidity we need. Certain TPs already have an international presence and we believe the time is opportune to further leverage on these global linkages.

4. Building Blocks: Internationalising Our Derivatives Market and Growing Average Daily Volume

1. The focus for 2010 has mostly been on putting the building blocks in place to internationalise our market and grow the average daily volumes traded. To compete internationally, we can no longer rely on organic growth. The only way to make that quantum leap is to go global, and we have made many of the key infrastructure changes in the form of technological enhancement, rule changes and securing trade reliefs.

5. Technological Infrastructure

1. In 2010, our first task was to develop the technological infrastructure for our market. Historically, there has been a low take-up rate for infrastructure by the industry, and it serves as a barrier to entry. To ensure that all TPs are able to subscribe to a reliable system, Bursa Malaysia took the initiative to host a CME-certified broker front end system, better known as OMS. The aim was to provide the industry with early system readiness to immediately trade on CME Globex®. CMDF was instrumental in supporting our OMS initiative and has since funded the one-time software licensing fee for OMS.
   
   In October 2010, one month after the migration to CME Globex®, we introduced internet trading for derivatives. Internet facilities are essential to tap into the growing presence of sophisticated traders and allow for trading by local investors through Malaysian TPs electronically. Both the OMS and internet trading model are regarded as necessary catalysts to improve distribution channels.
   
   CME's own telecommunication hub in Kuala Lumpur was launched in May 2010, and complements our infrastructure. The CME Malaysian hub will act as an international gateway for greater accessibility by both local and international traders and connects our market to the rest of the world.

6. Launch of CUPO

1. As means to strengthen Malaysia's position as the global price benchmark for crude palm oil, BMD licensed CME the right to use the settlement prices for its RM-denominated FCPO. In May 2010, CME launched the USD-denominated futures contracts in Crude Palm Oil, or CUPO. CUPO provides industry players with more arbitrage opportunities; international players have greater choices for hedging in dollars to mitigate currency risks.

7. Removing Regulatory Barriers to Entry and Securing Trade Reliefs

1. In April 2010, we received BNM approval for the relaxation of the Foreign Exchange Administration Rules. Resident futures brokers are now allowed to make payments, on behalf of residents, to non-residents for foreign currency-denominated derivatives (excluding currency contracts) transacted on specified overseas exchanges. This was greeted favourably by brokers and helps greatly in the management of risk.
   
   The Derivatives Clearing House has also extended its acceptance on foreign currency collateral for margin coverage from December 2010 onwards to include Renminbi and Hong Kong dollars in addition to the current US dollars, Japanese yen and Singapore dollars, to appeal to a broader investor base.
   
   In June 2010, another milestone was secured with the granting of trade relief for our TPs. The US CFTC now permits TPs to solicit and accept orders and customer funds directly from US customers for trading on the Exchange, without having to register with the CFTC as Futures Commission Merchants. A TP must make a filing with the National Futures Association of the US to avail itself of the relief, but this opens up new market possibilities for TPs. Nine TPs have since filed with the National Futures Association and avail themselves on the said relief.

8. Market Readiness for Brokers

1. We realised that meaningful market engagement and education were key. Broker engagement was at the highest levels ever. Together with our CME partners, "onboarding" and one to one sessions were held at brokers' premises to ensure that they were ready to migrate to CME Globex®, both from a technological and market readiness view point. Vigorous training and education sessions continued for our internal users, TPs and regulators to familiarise them with OMS, CME Globex® and its functionalities.

9. Increasing Our Sales Force

1. We recognise the need for a continuous supply of sales personnel to market derivatives products. To this end, we are working closely with our regulators to see how certain participant requirements can be liberalised in light of the current business environment, whilst working on our recruitment campaigns for Locals and FBRs. We are also exploring with universities how we can build a meaningful collaboration to encourage the younger generation to venture into the derivatives market as a career, whether with the Exchange or the TPs. Over time, we hope to build a sustainable resource model to continuously replenish this vital support group.

1. Retail Investor Engagements

1. Retail investors have always been a crucial investor segment for us, and Bursa Malaysia is committed to retaining, developing and engaging with this segment. Significant effort is put into understanding, educating and inspiring retail investors. Our various in-house programmes and collaborative projects with our partners have a common purpose - we want to develop a sustainable and diversified investor base, both locally and internationally.
   
   At the beginning of the year, Bursa Malaysia organised an industry leadership forum called 'Rethink Retail'. Attended by various captains of industries, the highlight of this forum was the sharing of insights into Malaysian attitudes to investing. The forum's objective was to initiate a mindset change and promote planning collaboration amongst key stakeholders and partners. It was also the starting point for various activities designed to create a more vibrant retail market, by reaching out to young retail investors and overcoming misconceptions through education and information.
   
   a.  Young Investors
   
   
   1. Interaction with young Malaysians is a feature of many of our investor development efforts. Talks were held at Bursa Malaysia throughout the year for visiting students from local and foreign universities. Topics covered included an overview of the capital market and the basic understanding of investment. We also worked with youth bodies such as the YCM. Bursa Malaysia sponsored the 1^st Annual Young Corporate Malaysians Summit (Reinventing and Liberalising Malaysia's Economy) in December 2009, and I was a participant in the 25^th YCM CEO Series in July 2010. The event was attended by professionals between 21 and 35 years old.
      
      There was also a series of advertorial articles published in the media, aimed at changing perceptions about investing in shares and other capital market instruments as an option to savings, unit trust and investment-linked insurance.
   
   b.  Taking the Word to the Market
   
   
   1. In line with Bursa Malaysia's retail strategy of sustaining and engaging existing investors, we continued with our annual nationwide engagement programme called 'Market Chat'. Market Chat remains an integral part of Bursa Malaysia's Retail Investor Engagement Programme and is now in its fourth year with the launch of the 2010/11 series in October 2010. In total, there were 58 Market Chat roadshows in 2010. This year, 79 more roadshows will be held at various locations, with a special focus on the East Coast of Peninsular Malaysia, Sabah and Sarawak. The latest series is conducted in conjunction with eight broker partners, and will concentrate on raising the profile of alternative investment products (CBBCs, ETFs and REITs). The events will also help create greater awareness of the valueadded services Bursa Malaysia provides for retail investors, such as internet trading and e-Dividend.
      
      In June and July 2010, Bursa Malaysia and a local investment bank jointly organised two retail investment seminars for high-net-worth individuals. The talks showcased top financial experts and offered the audience practical strategies and ideas on surviving and thriving in a climate of global volatility.
      
      We also participated in several retail investor conferences during the year such as Minggu Saham Amanah Malaysia 2010, Minggu Kesedaran Kewangan 2010 and Asia Trader and Investor Convention (Singapore and Kuala Lumpur).
   
   c.  Awareness of Derivatives
   
   
   1. In the derivatives area as well, education is a prerequisite if we are to encourage greater retail participation. During the year, we jointly hosted educational road-shows, called 'Talk Futures', with TPs across Malaysia to cater to retailers and FBRs. We have since seen a gradual growth in the number of futures accounts maintained. These retail road shows will continue next year as we aim to bring new, younger players into our market. In 2010, we successfully conducted 61 Talk Futures roadshows.
      
      Going forward, Bursa Malaysia will continue with its investor education and retail engagement initiatives. It is our hope that these efforts will solidify our market position as a primary catalyst in building an informed investment community in Malaysia, in line with the country's quest to develop a knowledge-based economy.
   
   

2. Institutional Investor Engagements

1. a.  Promoting our Securities Market
   
   
   1. Our annual Invest Malaysia conference has become a permanent date in the calendars of many institutional investors from home and abroad. The sixth Invest Malaysia conference was held in March 2010 and continued to attract local and foreign institutional investors. IM 2010 was a national effort as it showcased portfolio and direct investment under one roof.
      
      Invest Malaysia has evolved into a communication platform as well as a springboard for action. It provides a sounding board for policy makers who can engage with market participants, as well as a channel to communicate the Malaysia Story. The success of these conferences demonstrates that we have achieved a fine, productive balance between the national agenda and business agenda.
      
      As a follow-through of IM 2010, an Invest Malaysia road-show was held in Europe in late June/early July 2010. Meetings were arranged with targeted new investors as well as opinion leaders in Paris, London and Edinburgh. Media roundtables and interviews were also organised as part of the process of moving towards the upgrade of Malaysia by FTSE to Advanced Emerging Market status.
      
      More Invest Malaysia roadshows were held in Hong Kong, Beijing and Tokyo, in October and November 2010. The focus for Hong Kong and Beijing was mid-tier funds and QDII funds respectively.
      
      The two over-arching strategic objectives of Invest Malaysia are business development (diversifying and broadening our investor base) and communicating the Malaysia Story, as well as managing external perceptions of our capital market.
   
   b.  Profiling our Derivatives Market
   
   
   1. Institutions are also important players in the derivatives area, and we organised and participated in various events, together with our CME partners and third parties. These events were designed to profile our derivatives market, the partnership with CME and the products we offer.
      
      Our well known annual POC conference provided a local platform in March 2010. The third party events included FIA Chicago, FOW and the FIA Singapore, CIOC China and Globoil India. Brokers were supportive of our efforts and aggressive in their own marketing.
      
      In the 'Euromoney' event in Hong Kong, our BMD team joined forces with BNM and SC officials to conduct several education and awareness dialogues, designed to dispel myths about Malaysia's foreign exchange controls through 'Perception vs. Reality' sessions. The crux of the message was that there are no restrictions on the trading of derivatives by foreigners in Malaysia or the repatriating of funds arising from such trading activities.

1. Erosion of our competitive position, with Bursa Malaysia regressing and being marginalised, resulting in our losing ground to other regional/global markets, with an inability to attract investors and quality companies to list on Bursa Malaysia.
2. Our business strategy does not deliver on its objectives and targets, with the consequential undermining of confidence in Bursa Malaysia both as an exchange and as a listed enterprise.
3. Ineffective management of talent within the organisation, leading to loss of key personnel to competitor exchanges or to issuers.

• protection of investors;
• ensuring that markets are fair, efficient and transparent; and
• reduction of systemic risk.

• raising the standard of CG by PLCs;
• improving the quality and timeliness of disclosures to the market;
• raising the standards of business conduct by market participants;
• increasing the effectiveness of our enforcement activities; and
• elevating the level of education and awareness-raising activities for the industry.

1. Revitalising the Market
   
   • Make the process of trading easier, reduce the friction of transacting on our markets and adapt to new requirements;
   • These will be manifested by strengthened liquidity, improved trading velocity and increased vibrancy of the market.


2. Developing World Class Capability and Capacity
   
   • Develop well-versed, highly skilled and committed manpower to drive a thriving, innovative and efficient capital market;
   • Through thought-leadership, Bursa Malaysia aims to be at the forefront of the industry.


3. Improving the 'Eco-System'
   
   • Promote further liberalisation of the market by working closely with relevant policy makers;
   • Encourage greater participation from PLCs and market intermediaries to increase market competitiveness.


4. Improving Efficiency and Productivity
   
   • Review our market structure as well as simplify rules and processes to make it more efficient and cost effective;
   • Continuously upgrade our infrastructure.


5. Internationalising the Market
   
   • Extend our global appeal and facilitate foreign access to our markets by foreign investors and issuers;
   • Expand the range of international products.

1. Securities Market

1. A vibrant market is essential if Bursa Malaysia is to continue to be attractive to investors and issuers. We will step up efforts, together with other industry stakeholders, to attract more large capitalisation issuers, with sizeable free floats. Other action plans include introducing intra-day shorting, increasing the number of PDTs and improving overall trading liquidity. Efforts will also be put in ensuring ease of trading, a transparent and readily understood regulatory environment and improved market infrastructure.
   
   We will continue to promote intra-ASEAN trading to diversify and expand financial choices available to investors, and improve the efficiency of delivery of financial products and services. We are also putting together an international board which will bring foreign securities closer to our investors, create a more diverse investor base, and further internationalise our markets. As for the bond market, we are currently working on guidelines and a framework which will allow for direct retail participation in listed corporate bonds, making this important segment available to a far wider investment audience than before.

2. Derivatives Market

1. From a technological perspective, our work is never finished. In 2011, we will see a period of post-stabilisation following our migration to CME Globex®. We will also undertake a major technological enhancement by developing a new Derivatives Clearing System. This agile system will be multi functional and possess multi currency, multi asset class and multi time-zone capabilities needs.
   
   To further broaden our market horizon, we will widen our distribution channels, increase our sales force and provide greater accessibility to our products. The volume growth coupled with improved participation from foreign players post CME Globex®, are early indicators of validation of the globalisation path that Bursa Malaysia has taken for the derivatives business segment. 2011 will certainly see a continuation of the process of internationalisation and growth.

3. Islamic Market

1. The global market for Islamic financial products has grown at an average rate of 20% over the last five years. Malaysia's position at the forefront of this development is largely attributable to the MIFC initiatives, to which Bursa Malaysia is a key contributor. We are proud that Bursa Malaysia is the only market in the world with an Islamic Capital Markets regulatory framework. We are pleased, also, to be one of very few exchanges offering a range of Shari'ah compliant products in the securities markets.
   
   The resilience of the Islamic banks in the recent global financial crisis proved that Shari'ah compliant finance is a viable alternative to conventional markets as it is disengaged from speculative financial products which do not have an underlying asset base. These products are often cited as a primary cause of the "credit crunch", the excesses which led to the near collapse of financial markets, and the global economic recession which followed. As a result, the appeal of the Islamic investment products has been enhanced as investors seek to diversify risk in their portfolios. At Bursa Malaysia, we have a range of Shari'ah compliant products encompassing listed equities, ETFs and REITs.
   
   Not surprisingly, Islamic markets and Islamic products feature large in Bursa Malaysia's development plans. They are an aspect of our exchange which differentiates us from our competitors, and they are a key element in our initiatives to internationalise our markets. We are committed to remain a thought leader and a pioneer in innovation as the development of Islamic financial products transforms Islamic finance into a global industry.

1. Liberalising equity holding requirements and investment limits, such as allowing GLICs increase investment in overseas markets to explore opportunities for better returns;
2. Further divestment by GLICs, which will increase the free float in the market, potentially triggering significant increases in stock turnover, benefitting larger players in particular;
3. Issue of new stock-broking licenses to eligible local, foreign or joint-venture companies to increase retail market participation;
4. Relaxing some of the processes and procedures for the listing of companies and products; and
5. Enhancing cooperation with regional and, possibly, other foreign bourses.