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FINANCIAL REPORTS
175
Bursa Malaysia •
Annual Report 2015
NOTES TO THE
FINANCIAL STATEMENTS
31 DECEMBER 2015
35. Contingent liability
In connection with the partial disposal of Bursa Malaysia Derivatives on 30 November 2009, the Company had entered into put and call options with
the Chicago Mercantile Exchange (“CME”) Group over the ordinary shares of Bursa Malaysia Derivatives representing the 25% equity interest disposed
of to the CME Group. The exercise price for the put and call options shall be determined based on a pre-agreed formula which takes into consideration
the performance of Bursa Malaysia Derivatives and other peer exchanges.
36. Financial risk management objectives and policies
The Group and the Company are exposed to market risk (which comprises equity price risk, interest rate risk and foreign exchange risk), liquidity risk
and credit risk arising from their business activities.
The Group and the Company ensure that the above risks are managed in order to minimise the effects of the unpredictability of the financial markets
on the performance of the Group and of the Company. There has been no change in the nature of the risks which the Group and the Company are
exposed to, nor the objectives, policies and processes to manage those risks compared to the previous year.
(a) Market risk: Equity price risk
Equity price risk is the risk that the value of an equity instrument will fluctuate as a result of changes in market prices. The Group and the
Company are exposed to equity price risk through the Company’s holding of shares in the CME Group. The shares were obtained as part of the
purchase consideration in the strategic alliance forged with the CME Group.
The Group and the Company monitor the value of the equity holding by considering the movements in the quoted price, the potential future value
to the Group and the sell down restrictions surrounding the equity holding.
An increase/decrease of 1% (2014: 1%) in the quoted price of the instrument would result in an increase/decrease in equity of RM1,487,000
(2014: RM1,186,000).
(b) Market risk: Interest rate risk
Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Group and the Company are exposed to interest rate risk through the holding of unquoted bonds, commercial papers and deposits with
licensed financial institutions.
The Group and the Company manage interest rate risk by investing in varied asset classes.