The digital wave is impacting the global financial landscape in a multitude of ways, leading to the introduction of new business models and solutions, making financial products and services available to more people by lowering costs and barriers to access. This evolution is being driven by a variety of factors, from changing demographics and investment behaviour, increased consumer expectations, growing demands for alternative financing for small businesses, to technological advances.

At the Securities Commission Malaysia (SC), we believe that socially-beneficial financial innovation should be encouraged given that such developments not only address growing demands by consumers but also hold promise for greater democratisation of markets by complementing traditional channels of intermediation through greater ease of entry and use, enabling fundraisers and investors to benefit from accessibility, cost-savings and convenience.

While the SC welcomes such developments and believes that there is a place for digital business models in the Malaysian capital market, however, this must be subject to the bounds set by a transparent and well-regulated ecosystem, to ensure that innovation does not come at the expense of market integrity and investor protection.
We aim to continue our efforts in facilitating innovations to better serve the needs of our economy and participants, while at the same time safeguarding investor trust and confidence. In line with this, we crafted a holistic digital agenda, designed to achieve four main objectives - enhance access to financing, increase investor participation, augment institutional market and develop synergistic ecosystems.
Enhance Access to Financing
Many Malaysian micro, small and medium enterprises (MSMEs) face challenges in obtaining funding through traditional sources of funding to meet their financing needs. Despite being a vital component of the Malaysian economy, MSMEs are traditionally underserved by the financial system.

To address this, we focused on facilitating market-based financing avenues such as equity crowdfunding (ECF) and peer-to-peer (P2P) financing to narrow this gap, by providing an alternative source of capital for MSMES to fund early stages of business development, business expansion, finance working capital and meet other financial requirements.
Increase Investor Participations
It is important that we continuously identify new and innovative investment solutions to encourage the participation of the emerging “digitally-inclined” generation of investors to invest in the capital market. While most people would associate the below-30 demographic as more digitally-inclined, further research has shown that the Digital Generation is not just limited to millennials, but extends across age demographics. Inspired by the digital user experience they encounter in their daily lives, these investors are demanding similar level of experience from their financial services providers - preferring to interact with technology for their investment needs.

To meet the needs of this new segment of investors, the SC is facilitating the offerings of digital investment services in the Malaysian capital market. Digital investment services include a range of capital market services which have emerged due to digital innovation such as digital investment management (which includes robo-advisory), micro-investments, social trading/trade mimicking, and the like. The SC is of the view that the digital investment space is clearly an area where intervention and facilitation by regulators could help the industry to develop new, more cost-effective and transparent ways of delivering investment services to consumers, making investments affordable and accessible to all. Such services would complement the existing suite of investment channels to enable more consumers, particularly those who have been underserved, to access these services at an affordable cost.
Augment Institution 
By leveraging digital, greater transparency of information can be achieved within the capital market. With greater transparency, our market would become more efficient and be able to attract greater investor participation.

For example information relating to our secondary bond and sukuk market, used to be highly fragmented among different sources and not easily accessible. While information on a new issuance was generally readily available to all potential investors via offering circulars, nevertheless there was less transparency of bond and sukuk data post-issuance, especially in areas of credit risk and pricing. These data, was only accessible to large institutional investors and seldom, if at all, available to the smaller investors. As part of our efforts to introduce greater transparency and spur further growth in these markets, the SC established the Bond + Sukuk Information Exchange Malaysia (BIX Malaysia) in 2017. BIX Malaysia is a centralised online information platform, to enable investors to obtain necessary information on ringgit bonds and sukuk to assist in their investment decisions. 

With advancements in analytics capabilities, such as big data, machine learning and the improved scalability and commoditisation of computing power, leading buy-side and sell-side firms are increasingly adopting advanced analytics to facilitate quantitative research, investment decision-making, performance attribution and tracking. Moving towards a factbased, insight-driven investment approach will also inspire greater confidence from investors who are often unclear of the rationale behind investment strategies designed by FSIs. These institutions with strong analytical capabilities can expect to rely on it to provide a competitive advantage to improve their investment decision-making, risk management and product development capabilities. In most cases even having some basic analytics can help FSIs identify incremental improvements to their businesses and operations, whether through improved modelling or process optimisation.
Developing a Synergistic Ecosystem
While intermediaries, financial service institutions (FSIs), start-ups and exchanges may be the main drivers of Digital Markets, there is still a need to develop the surrounding ecosystem service providers which are also key players in the value chain. These service providers include custodians and trustees, rating agencies and information vendors. `Digitising’ these ecosystem players will allow faster, and more seamless access to these services, thereby creating a more transparent and efficient market. We are working closely with our capital market ecosystem service providers to build market-relevant digital services and offerings to meet the needs of the ecosystem.
“Alliance of FinTech Community” (aFINity), is an initiative by the Securities Commission Malaysia (SC) launched in September 2015 to catalyse greater interest and visibility towards nurturing development of financial technology (FinTech).
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