A New Market

Kuala Lumpur, 18 February 1997

A survey of OTC markets around the world shows that successful markets tend to be member-owned. They are either set up as a division or a wholly-owned entity of a stock exchange, or are owned by the relevant national association of securities dealers.

The Alternative Investment Market, for instance, is a unit of the London Stock Exchange and it uses all the surveillance resources and trading facilities of the Exchange. Similarly, the Canadian Dealing Network is a division of the Toronto Stock Exchange although unlike AIM, it has its own independent trading and surveillance system. The newly established Le Nouveau Marche Marche or the New Market in France is also owned by the Paris Bourse.

OTC markets that are established independently of the national exchange but are set up by the relevant national dealers' associations include Nasdaq, which even before operating a market, was first and foremost the National Association of Securities Dealers, a self-regulatory organisation. Similarly, Jasdaq, which is operated by the Japan OTC Securities Co. Ltd., is a company owned by the Japan Securities Dealers Association (JSDA).

There are many reasons why this new market should be separate from the KLSE, the more important being:
  • it is a 'higher risk' market because the companies which will be admitted will not have much of an operational history, and in the extreme may not even have commenced business operations;
  • the market will operate under a full disclosure-based regulatory environment;
  • market intermediaries like the brokers, advisers, underwriters etc. will have to assume new roles and responsibilities which are distinct from the main market, the KLSE, as well as higher standards of compliance and disclosure;
  • market intermediaries will be held to higher standards of sales practices, and a stringent application of the 'know your client and product' rule;
  • participants in the new market will not be limited to the existing stockbroking industry; and
  • the trading system will incorporate elements of both order-driven and quote-driven systems.

The full implementation of disclosure-based regulation in this new market will serve to ready the main market towards standards and practices the Malaysian capital market should ultimately be adopting, in line with the regulatory regime in other developed capital markets.


about the SC
The Securities Commission Malaysia (SC) was established on 1 March 1993 under the Securities Commission Act 1993 (SCA). We are a self-funded statutory body entrusted with the responsibility to regulate and develop the Malaysian capital market.

General Line: +603-6204 8000
General Email: [email protected]
© Copyright Securities Commission Malaysia.  Contact Us   |    Disclaimer   |   The site is best viewed using Microsoft Edge and Google Chrome with minimum resolution of 1280x1024
Generic Popup