SC, foreign regulators developing best practices for securities settlement systems

Kuala Lumpur, 18 July 2001

The Securities Commission (SC) of Malaysia is working with foreign regulators to make recommendations on international minimum requirements and best practices for an efficient, sound and safe securities settlement systems.

The SC, as a member of the of the joint CPSS-IOSCO (the Committee on Payments and Settlement Systems-International Organisation of Securities Commissions) Task Force on Securities Settlement Systems, sits with 26 central bankers and securities regulators from 18 countries and the European Union to develop these benchmarks.

The CPSS-IOSCO Task Force on Securities Settlement Systems held a two-day meeting at the SC last week.

SC Chairman, Datuk Ali Abdul Kadir said minimum requirements and best practices were essential to promote confidence in the capital market and reduce risk to its investors. The task force looks at the risks within the securities settlement systems and recommends minimum standards and best practices to manage these risks.

"The need for minimum standards for securities settlement systems has become necessary with the increasing integration of global markets and the growing significance of the securities markets for the intermediation of funds," said Datuk Ali.

The meeting, during which the SC was represented by its director, Ranjit Ajit Singh, discussed a draft report on the securities settlement systems which was released for public comment in January (see the International Affairs Section of, and the public comments which have been submitted. The final report is expected to be out next year.

Datuk Ali said recommendations by the task force would have important implications on the development of the Malaysian capital market.

"The Malaysian capital market has consistently strived towards the adoption of high standards by benchmarking its practices to internationally accepted standards. Thus, the SC will consider seriously the final recommendations for the development of the Malaysian capital market, including issues related to policies, operations and governance structures adopted by all parties involved with securities settlement systems in the Malaysian capital market. The parties will include the clearing house, the central depository, the exchanges, the regulators, custodians and stockbroking companies.

"As a result of our involvement in the formulation of these recommendations, we have considered and reflected some of them in the Capital Market Masterplan," Datuk Ali said.

The report identifies 18 key recommendations on minimum requirements and best practices for sound securities settlement systems. The recommendations encompass the legal framework for securities settlements, risk management, access, governance, efficiency, transparency, and regulation and oversight. The recommendations are designed to cover systems for all types of securities - for securities issued in both industrialised and developing countries as well as for domestic and cross-border trades. In the work conducted, the Task Force has reviewed private sector efforts in this area, notably the Group of Thirty's 1989 Standards.

The Task Force is co-chaired by the Board of Governors of the Federal Reserve System of the United States of America and the Commissione Nazionale per le Societa e la Borsa, Italy.


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