Securities Commission and Commodities Trading Commission Merged

Kuala Lumpur, 16 April 1997

The regulation of commodity futures came under the purview of the Securities Commission (SC) with the merger of the Commodities Trading Commission and Securities Commission today.

The SC Chairman Dato' Dr. Mohd. Munir Abdul Majid said that the merger is a milestone in Malaysian capital market development.

"The move stems from the government's decision to rationalise the regulatory framework to create efficiencies in regulation and reduce costs of compliance for market participants," said Dato' Munir.

With the merger, the Kuala Lumpur Commodity Exchange (KLCE), the Malaysian Futures Clearing Corporation (MFCC) and their members will be regulated by the SC.

"It is business as usual with the merger. The SC has absorbed CTC staff and while they have been integrated into the existing SC structure and will operate from the SC office in Jalan Semantan, the commodities futures market participants should not expect any changes in their day-to-day dealings with the regulator," said Dato' Munir.

The SC absorbed 24 staff of the CTC at not less than favourable terms than before the merger.

The SC Chairman said that the current development plans for the capital market will now also include the commodity futures industry.

"The SC's business plan to move to disclosure-based regulation, to promote frontline regulation, to raise the professional standards and conduct of market intermediaries, and to rationalise the regulatory framework of the market will also apply to the commodities futures market," said Dato' Munir.

With the SC policy on a single clearing house, discussions between the SC, MFCC and the Malaysian Derivatives Clearing House have started on the merger of the two clearing houses.

"The SC is being consistent with its policy on risk management - it wants only one clearing house for the futures market. The merits lie in financial integrity and systemic stability being managed through a central clearing house. At the same time, market intermediaries benefit from cost efficiencies," said Dato' Munir.

The merger between SC and CTC results in three exchanges for the futures market - KLCE, the Kuala Lumpur Options and Financial Futures Exchange (KLOFFE) and the Malaysia Monetary Exchange (MME).

"With one regulatory agency supervising three exchanges, it sets the stage for further economies to be achieved through the rationalisation of the activities of market institutions and participants. It would be in the interest of the industry for the exchanges to integrate," said Dato' Munir.

The expansion of SC's powers was effected through the Futures Industry (Amendment and Consolidation) Act 1997, which repeals the Commodities Trading Act 1985. Concomitant changes have also been made to the Securities Commission Act 1993 and the Futures Industry Act 1993. As a result, the functions previously performed by the CTC under the Commodities Trading Act will now be undertaken by the SC.


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