Embracing Innovations - Digital | Securities Commission Malaysia

Embracing Innovations

We aim to continue our efforts in facilitating digital 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 micros, small and medium enterprises MSME(s) face challenges in obtaining funding through traditional sources of funding to meet their financing needs. Despite being a vital component of the Malaysian economy, MSME(s) 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 MSME(s) to fund early stages of business development, business expansion, finance working capital and meet other financial requirements. Observing heightened interests by MSMEs to tap into alternative fund raising channels, the SC has also allowed ECF and peer-to-peer (P2P) financing platforms to operationalise in secondary trading and encouraged for the offering of more financial products to the growing online trading community in the country.

With the rise of digital assets in the financial services industry, Initial Exchange Offering or IEOs are the latest trends taking the crypto space by storm. IEO fundraising event allows offerings of digital tokens through an IEO platform operator for early-stage entrepreneurs. In contrast to an Initial Coin Offering (ICO), IEO cryptocurrency exchange facilitates the token offering on a regulated fundraising platform rather than the start-up doing it themselves. While IEO enables companies to raise funds via the issuance of digital tokens in Malaysia, Digital Asset Custodians (DAC) allow companies to be custodians for digital assets to ensure the protection of investors’ funds from being stolen or misappropriated during a fundraising exercise.

To learn more about digital initiatives and available fundraising avenues, click HERE.
Increasing Investor Participation
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 a similar level of experience from their financial services providers - preferring to interact with technology for their investment needs. This has led to the emergence of new digital capital market players such as online equities brokers, Digital Investment Management (DIM) companies and Digital Asset Exchanges (DAX).

Online equities broker revolutionizes online stock trading by not only facilitating trading but also enabling retail investors to trade online. Through the use of algorithms and automation, DIM offers investors with a new channel to manage and grow their investments, which is more convenient, accessible and affordable. With the rise of digital assets powered by Distributed Ledger Technology, the SC introduced the DAX framework to facilitate the trading of digital assets such as bitcoin and ethereum. The DAX framework is part of the SC’s efforts to promote innovation while ensuring investor protection in the trading of digital assets.

The SC believes that the digital investment space is an area where intervention and facilitation by regulators could help the industry develop new, more cost-effective and transparent ways of delivering investment products and services to consumers. 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 a relatively affordable cost.

To learn more about digital initiatives and available fundraising avenues, click HERE.
Augmenting Institutional Market
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 the 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.
Developing Synergistic Ecosystems
Notwithstanding digitalisation of intermediaries, financial services institution (FSIs), start-ups and exchanges, there is still a need to develop the surrounding ecosystem service providers. These service providers include custodians and trustees, rating agencies and information vendors and brokers. `Digitising’ these ecosystem players will allow faster, and more seamless access to these services, thereby creating a more transparent and efficient market.

As part of ongoing efforts to modernise and promote efficiencies within the capital market, the SC launched the Brokerage Industry Digitisation Group (BRIDGe) in Aug 2018 and the Fund Management Industry Digitisation Group (FMDG) in Nov 2019. Both initiatives aim to facilitate collaboration among regulators and relevant stakeholders to accelerate Malaysia’s stockbroking and fund management industry digitisation.

ALLIANCE OF FINTECH COMMUNITY (aFINity)

In September 2015, the Securities Commission Malaysia (SC) launched the “Alliance of FinTech Community” (aFINity) to catalyse and nurture Fintech development in the Malaysian capital market. It serves as a platform for continuous interactions between the SC as a capital market regulator and all relevant Fintech stakeholders such as innovators, financial institutions, government agencies, ecosystem players and investors.

The aFINity engagements facilitate discussions to create a healthy ecosystem for Fintech to thrive. Towards promoting responsible financial innovations, these engagements allow SC to gain insights from the community on emerging Fintech innovations and also provide regulatory support for new or emerging innovative Fintech ideas.

Through aFINity, we also collaborate with international financial services regulators to promote innovation in our respective market, which includes signing innovation co-operation agreements (Fintech Bridges) and frameworks. You can find the list of our agreements HERE. If you require our regulatory support and would like to use the referral mechanism, please email us at [email protected].

To know more about aFINity engagements and how can we help your innovative Fintech ideas, click HERE.

Be part of our community to:

Explore and discuss new FinTech ideas and solutions with the SC
Obtain clarity regarding any FinTech policy and regulatory matters
Participate in interactive focus groups at the policy formulation stage in line with your area of interest
Enjoy first hand updates regarding SC-led FinTech regulatory developments and events
Attend frequently held aFINity talks and educational programmes regarding specific areas on FinTech

aFINity Participants Demographic

Our Membership Demographic
We currently have 518 aFINity members from a wide range of backgrounds:

Our Engagement Profile
In 2022, we had 88 cases by various portfolios:

Prospective clients go online to define their:

Financial characteristics
Risk profile
Financial goals

by answering a series of questions in an online questionnaire.

Based on the risk profile, a proprietary algorithm is run to define the best suited, personalized investment portfolio to minimize risk and maximize performance.

The resulting investment recommendation is displayed online for future clients to visualise the potential gains and losses of the proposal, as well as a more or less detailed composition of the proposed portfolio with exposure levels and target underlying securities.

The empowered investor can accept and proceed with an online transfer/account opening.

The algorithm will provide discretionary management services steered by the risk profile and investment allocation.
Customers will be able to track their investment performance anytime anywhere on their mobile.