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CEO’S MESSAGE AND MANAGEMENT DISCUSSION AND ANALYSIS
UPHOLD MARKET INTEGRITY
Bursa Malaysia has always strived to fulfil its key regulatory role in ensuring a
fair, orderly and efficient market. This commitment is the key enabler of all that
we do as an organisation, and we are duty-bound to ensure that these obligations
are dispensed to the best of our ability. To this end, we are continuously looking
at new developments in best practices for markets, and ensuring that these
practices are observed by Malaysian public listed companies.
In 2014, to address the International Organisation of Securities Commissions’
Principles for Financial Market Infrastructures Principle 4, we restructured the
Clearing Guarantee Fund, by replacing the RM60 million Standby Credit Facility
from Bursa Malaysia with cash allocated from Bursa Malaysia Securities Clearing.
This initiative was part of recommended best practices, published in February
2013, jointly undertaken by World Bank and the International Monetary Fund in
relation to the Financial Sector Assessment Program on Principles for Financial
Market Infrastructures. The restructure effectively strengthens our credit risk
management framework and provides greater clarity on the accessibility and
availability of funds in the event of a default. We also took proactive actions to
manage the wide variety of risks that could affect our business and the markets.
To ensure that our markets operate in a fair, orderly and efficient manner, and that
market integrity is upheld, we implemented mitigation measures and controls
to manage business interruption, market regulation and systemic risks. We are
pleased to report that both our securities and derivatives trading systems posted
a 100% uptime in 2014.
Apart from the usual risks, we are also watchful of any emerging risks that
could pose a threat to Bursa Malaysia. For example, we made cyber security a
priority in 2014, and have subscribed to a Securities Operations Centre service to
address potential digital threats to our systems. We have also received ISO27001
certification from Cyber Security Malaysia, which certifies that our system meets
the required data and information protection metrics.
Last year we implemented Last Price Limits to control price aberrations during
the last 15 minutes of trading. As part of our mandate to maintain a fair and
orderly market, this market control feature complements our current Static Price
Limits and Dynamic Price Limits to prevent wild fluctuations in securities prices
owing to erroneous trades and other aberrations at market close.
LEVERAGING ON THE GLOBAL PULSE
As a regional and global player, we keep a finger on the pulse of global trends to
ensure that our plans make the most of the opportunities presented by a dynamic
investing environment.
Changing global trends represent both challenges and opportunities for us, and
we must remain agile to leverage on new developments to remain sustainable.We
have already adjusted some of our priorities in response to global developments
and been rewarded in doing so. The following are some key trends with respect
to the industry and our responses to them.
1. Accelerated growth in the derivatives business:
Over the last few years, the exchange industry has witnessed the increasing
importance and rapid growth of the derivatives business. This trend
continued in 2014, evidenced by continued mergers and acquisitions
activity involving derivatives exchanges and the signing of MoUs aimed at
strengthening collaboration and relationships between various exchanges.
We are cognisant of the increasing interest in derivatives products,
particularly by the retail segment, and have embarked on a number of
initiatives including education and awareness programmes to ensure that
our retail participants are equipped to trade in derivatives products. We
have also made the cost of entry cheaper for Trading Participants to take
advantage of the growing interest in derivatives trading.
2. Growing importance of market data and information:
Market Data and Information Services have in recent years been
acknowledged as a key area of growth for exchanges going forward, and
are now being viewed as a significant revenue line in their own right. 2014
saw exchanges working to improve in this area by expanding their service
offerings and holding cross-border collaborations.
As we have seen in the financial analysis of the Securities Market,
contributions from the Market Data segment showed the highest revenue
percentage increase as compared to the other segments. This is due largely
to our investments in new information packages.We believe that demand for
our market data will only continue to grow, especially as ASEAN continues to
gain prominence as a major investment destination.
3. Increasing globalisation of trading and investment:
While the globalisation of trading and investment has been a common
feature of the exchange industry over the last few decades, 2014 saw
further development in this area as countries such as China, Thailand and
Saudi Arabia sought regulatory approval for greater cross border trading
and listing. The formation of the AEC by the end of 2015 and its expected
lifting of barriers are further evidence of this trend.
In addition to our outreach activities conducted in regional countries, we
have also expanded our targets to set sights on other strategic partners
such as the Saudi Stock Exchange (Tadawul), with whom we have signed
an MoU. We remain selective about our partners as we need to be convinced
of mutual benefit in terms of value creation.
It is important to note that global trends are dynamic and that they do have
both direct and indirect consequences on our business. To ensure our long-term
sustainability as a business, we must continue to keep a watchful eye on market
trends and changing regulatory requirements, and adjust our position in relation
to developments.
FROM THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Bursa Malaysia
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Annual Report 2014
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