SC-led ETF Task Force Recommends Measures to Spur Innovation and Drive Industry Growth

17 May 2017 | Kuala Lumpur

A task force on Exchange-Traded Funds (ETFs) today released a set of key recommendations aimed at attracting greater investor participation and incentivising issuances by ETF managers in the Malaysian market.

The objective of the task force – chaired by Securities Commission Malaysia (SC) and comprising Bursa Malaysia, fund managers, market makers and institutional investors – is to spur sustained development and competitiveness of the Malaysian ETF market, capitalising on the strong growth trend and potential of the global ETF industry.

“The recommendations seek to enhance the ecosystem and drive further growth of the ETF industry in Malaysia. SC will work with the relevant stakeholders to implement these measures and develop a more vibrant ETF market that provides greater opportunities and options for investors and issuers as well as promotes more inclusive participation in the Malaysian capital market,” said Zainal Izlan Zainal Abidin, SC’s Managing Director of Development & Islamic Markets and chair of the task force.

Among the recommendations include facilitating issuances and investments, enabling product innovation and intensifying investor engagements.

To attract more issuers and encourage the issuance of ETFs, the task force recommends the lowering of the minimum capital requirement for ETF issuers from RM10 million to RM2 million. Other measures include removal of the requirement for submissions to be made by principal advisors, and reduction in the time to market in the issuance process.

The task force also recommends the broadening of the ETF distribution channels by permitting financial institutions, online platforms and financial planners to offer ETFs to clients via stockbroking companies. The use of such alternative distribution channels will provide investors greater access to a more diverse range of products at a lower entry cost.

In encouraging product innovation, the introduction of new types of ETFs, including futures-based and conventional commodity-based ETFs will be facilitated. This will provide affordable entry points for retailers in traditionally difficult–to-access investments. The task force also recommends allowing greater flexibility in terms of investment strategies including the introduction of Leveraged and Inverse ETFs.

To increase investor awareness and understanding of ETFs, Bursa Malaysia will intensify its nationwide roadshows and investor education programmes to attract participation, and to ensure that investors are knowledgeable and well-equipped in trading ETFs.

Recognising the important role of market makers in the ecosystem in providing trading liquidity to ETFs, SC and Bursa Malaysia are providing rebates and waiving relevant fees applicable to ETF market makers, including a 100% clearing fee rebate by both SC and Bursa Malaysia.

The various initiatives and recommendations of the task force will be implemented by the end of 2017.

SECURITIES COMMISSION MALAYSIA