Opening Address by
Tan Sri Ranjit Ajit Singh
Chairman of Securities Commission Malaysia
at Synergistic Collaborations by SC (SCxSC)
Digital Finance Conference 2017
in Kuala Lumpur on 6 November 2017

Introduction

Yang Berhormat Datuk Seri Johari Abdul Ghani,
Second Finance Minister of Malaysia
Excellencies, Distinguished guests,
Members of the media,
Ladies and gentlemen,
a very good morning to everyone.

1. Welcome to our annual “Synergistic Collaborations by SC” (SCxSC) Digital Finance Conference 2017 themed “Democratising Investments”.
2. Allow me to first of all thank the Honourable Second Finance Minister of Malaysia, Datuk Seri Johari Abdul Ghani, for gracing us with his presence this morning and agreeing to deliver the keynote address at our conference.
3. I would also like to thank our panel of distinguished speakers and guests – many of whom have flown from abroad to be with us here in Kuala Lumpur.
4. I am also grateful for the support of our fellow partners, Rakuten Trade, Wong & Partners, MDEC and Cradle for their contributions in making this conference a success. At the same time I would also like to record my appreciation to the media in continuing to work with us in promoting the SC’s efforts on Digital Markets.
5. I am particularly delighted to see that we have once again been able to attract a large crowd to SCxSC. We have had to move out into a larger venue this year as we’re no longer able to accommodate all of you in the SC Building. Let me say thank you to all participants – from the financial services industry, digital innovators, entrepreneurs, government agencies, VC / PE investors and members of the public for your ongoing support.
Ladies and gentlemen,
Progress on our Digital Markets Strategy
6. As this is the fourth SCxSC conference, I’m sure you are all aware that SC has embarked on this digital journey for several years now.
7. Last year, I shared with you our Digital Markets Strategy which is intended to achieve four key objectives, namely 1) Enhance Access to Financing, 2) Increase Investor Participation, 3) Augment the Institutional Market, and 4) Develop Synergistic Ecosystems. Today, I would like to share some of the progress we have made.
Objective: Enhance Access to Financing
8. Our market-based financing initiatives, equity crowdfunding (ECF) and P2P Financing have had good success in meeting the financing needs of our Micro, Small and Medium Enterprises (MSMEs).
9. In a short span of time we have seen overall about 450 campaigns funded through these platforms with close to RM50 million raised.
10. ECF have successfully funded 32 campaigns with RM 26 Million raised. Out of these campaigns, more than 70% of the issuers have women or youth founders. On the investor side, the six platforms have also attracted growing pools of investors, with 40% of those investing in these platforms being under the age of 35.
11. On the P2P Financing end, all six operators registered last year are now fully operational. While they have only been in the market for a short while, there have been 418 campaigns successfully funded across more than 50 issuers, with a total of RM17.2 Million raised. I understand that some of these campaigns have even been funded within an hour after launch. The volume and velocity of these campaigns reflect the enthusiastic response for P2P Financing from investors and issuers alike.
12. These statistics give a clear validation that there is a funding gap for MSMEs in the market which can be filled by alternative financing channels like ECF and P2P Financing. While there is still work to be done, there needs to be ongoing efforts to work closely with the industry to further promote and develop this market. For those who are not yet involved, our ECF and P2P operators have set up booths outside the hall, and we have dedicated parts of the conference to ECF Pitch Sessions and P2P Financing Workshops.
Objective: Develop Synergistic Ecosystems
13. We continue efforts to build our local digital finance ecosystem and catalyse greater interest and visibility towards digital finance. Our Alliance for Fin Tech community or aFINity programme now counts over 100 industry participants, representing a full cross section of stakeholders across the industry.
14. Since its inception, the team has conducted close to 100 aFINity engagement sessions. We have found these discussions to be extremely useful for both the SC and industry participants, and will continue to engage the aFINity community to increase both awareness and our capacity to provide guidance and support for innovative developments.
15. In addition to its outreach functions, SC has this year expanded the aFINity programme to include “Innovation Labs” which acts as a platform to facilitate the testing of new digital innovations within our industry. Since 2015, we have pioneered a regulatory sandboxing approach where regulation is imposed on a graduated scale in line with the growth of the market and complexity of the product. The Lab allows us to discuss and provide feedback to innovative business ideas and concepts, and to explore proof of concept solutions designed to meet specific industry needs.
16. In conceptualizing the Innovation Lab, we have taken feedback from industry stakeholders on the various use cases and emerging technologies which should be prioritized. Distributed Ledger Technology (DLT) or blockchain remained high on the radar this year.
17. Through the aFINity Innovation Lab, we have embarked on a pilot project to explore the usage of DLT in the unlisted and OTC market space. Traditionally, the unlisted and OTC market space have been opaque due to the lack of information available. By using a distributed ledger as the technology underpinning the market infrastructure, all transactions and market activities would be recorded and made available to all market participants, while still maintaining transaction confidentiality.
18. The findings from the pilot will be published as an industry blueprint. This blueprint will elaborate upon the technology architecture, key software functions, and development standards which will form the building blocks for interested parties to create such a DLT-based network for unlisted and OTC markets.
19. We welcome proposals from the industry to work collaboratively with us to explore other potential use cases across all emerging technologies.
20. It would be remiss for me to speak about DLT without mentioning cryptocurrencies and digital assets. Most of you are probably aware that we issued a public warning statement on ICOs in September, and we continue to stand by our statement that such schemes, in its current form poses significant risks to investors. Therefore, SC strongly encourages investors to fully understand the features of an ICO scheme, and carefully weigh the risks before parting with their monies. We are also now part of the IOSCO ICO Consultation Network where participating regulators are discussing the latest developments in this space.
21. At the same time, we note the growing interest of Malaysian investors in trading cryptocurrencies and digital assets. To facilitate such activities in our market and put in place appropriate einvestor safeguards, SC is reviewing relevant regulations and guidelines to facilitate functional and effective use cases of digital assets in the capital market, including secondary market trading of established crypto currency and digital assets.
22. You would also have noticed over the past few months that we have entered into a series of FinTech Cooperation Agreements, or more commonly known as “FinTech Bridges” with other regulators across the globe. With the pace of evolution in this space, it is imperative that regulators continue to stay abreast of all developments globally. These agreements will enhance the cross-pollination of digital finance concepts across our markets. Our Fintech bridges have enabled connectivity to major centres in Australia, Singapore, Hong Kong and the UAE (both Dubai and Abu Dhabi). We are currently pursuing additional linkages.
Ladies and gentlemen,
Objective: Increase Investor Participation
23. The theme for this year’s SCxSC, “Democratising Investments”, was chosen as it reflects the major digital initiatives undertaken by the SC to increase investor participation.
24. One of the great benefits brought about by the digital revolution is the democratization of socio-economic opportunities for the normal consumers and investors.
25. The Financial Services industry has not been immune to this change. Robo-advisory services have emerged to provide a more convenient, accessible and affordable channel for retail investors to gain access to portfolio management services, which traditionally have been reserved for high net worth individuals.
26. In May this year, SC was first in the region to launch our regulatory framework for Digital Investment Management (DIM), paving the road for automated discretionary portfolio management services to be offered to our Malaysian investors. Since the launch of the framework, we have received strong interest from both incumbent capital market players and startups, and we expect the first digital investment manager to be licensed early next year.
27. One of the core needs of millennial investors is the need for regular savings, even in small amounts, to be channeled towards investing for the future. To incorporate regular investments into their daily life, SC will be working with the industry to expand Digital Investment Management to explore the innovative concept of “Spare Change Investments” in our market.
28. This year we also licensed the first digital-only stockbroker for the Malaysian market, Rakuten Trade. I understand that they have received strong take up since launch, with more than 5,000 accounts opened to date and a big portion of these are new to market investors. As our innovation partner this year for SCxSC, you will be hearing from the Rakuten team as they share their thoughts and experience during the plenary sessions and the Rakuten FinTech track, so do watch out from that.
Ladies and gentlemen,
Objective: Augment Institutional Market
29. The Malaysian bond and sukuk market has achieved significant growth over the past two decades to reach RM1.3 trillion in size. Today, it is the 3rd largest market in Asia (relative to GDP) and the world’s largest sukuk market and a major source of funding in the capital market.
30. However, information on the bond and sukuk market is fragmented across multiple sources and typically only accessible by institutional investors. To enhance the transparency of the market, SC in partnership with the industry, have created a centralized bond and sukuk information platform which we are launching today.
31. The platform, known as the Bond+Sukuk Information Exchange, or BIX, will be a public utility and a cornerstone component of our overall bond and sukuk market infrastructure. It is the first of its kind in the world to consolidate bond and sukuk price and credit information combined with an advanced search function and other analytics to help investors making effective and informed investment decisions.
32. In parallel, SC will liberalise its rules to enable greater retail access in the corporate bond and sukuk market by Q1 2018. This involves reviewing the primary market issuance processes and disclosure requirements, as well as expanding the range of corporate bonds and sukuk offered to retail investors.
33. The secondary market will also be reviewed to enable the introduction of a “Seasoning Framework” to facilitate retail access to existing corporate bonds and sukuk that are currently traded in the wholesale market, subject to eligibility requirements. We hope that with these initiatives, as the theme suggests, we will democratize access to a RM1.3 trillion market.
Ladies and gentlemen,
Cyber Resilience and Ongoing Vigilance
34. As a regulator, we are also mindful of the risks which the advent of digital markets can pose to our market place. A key risk confronting us both locally and globally is the risk of rising cyber threats. SC had released our Guidelines on Management of Cyber Risk last year, and we have been hard at work in facilitating the implementation of the guidelines to strengthen the cyber resilience of our market and have also convened the capital market industry cyber security committee.
35. I would like to remind both our market participants, as well as our investors to remain vigilant and take the issue of cyber risk seriously. Cyber threats can start from something as simple as a phishing email which steals a user’s login and password to sell it on the black market, or use the credentials for even more sinister cyber breaches or data theft. We need to remain constantly vigilant against such attempts and strengthen our defenses against the eventuality of such attacks.
36. We have also been heavily involved in cyber security discussions globally through our role in IOSCO to devise regulatory best practices, and facilitate greater information sharing among regulators. Recently, the IOSCO Global Emerging Markets (GEM) Committee, which is chaired by the SC, conducted a Regulatory Cyber Workshop which included an interactive cyber simulation exercise where participants reviewed a case study of an actual cyber incident.
Ladies and gentlemen,
Closing Statements
37. SC continues to encourage market participants, both local and foreign, to develop innovative solutions that will improve efficiency and investor experience in our markets.
38. A big part of our Industry Dialogue this year was focused on how our players can better leverage the power of digitization to deliver greater business value and unlock operational efficiencies. This is necessary to continue to enhance the value proposition of our capital market and remain competitive.
39. We continue to look for synergistic collaboration opportunities with all parties in driving forward this agenda, and I hope to be able to count on your continued support as we progress down this journey. With that, I look forward to the insightful discussions ahead and wish all of you a thoroughly enjoyable time here at the conference.
Thank you very much.