Good morning ladies and gentlemen,

I am most delighted and grateful to see all of you here today and sharing with us what we consider as a momentous occasion for the Securities Commission This seminar, represents a historic chapter h1 the execution of the Securities Commission's regulatory and developmental functions as it is the first public seminar organised by our Securities Industry Development Centre (STDC) For the benefit of those of you who may not already be acquainted with the SIDC, it is a department within the Securities Commission whose primary objective is to educate industry participants on subjects pertaining to securities and derivatives towards achieving a sophisticated, innovative and competitive capital market.

With keen appreciation of the authority and responsibility entrusted in the Securities Commission, we are conscious of the need to exercise that authority and discharge that responsibility in a way that reflects the best interests of the capital market. In so doing, we have placed high on our list of priorities the education of retail and institutional investors, market intermediaries and advisers on their respective rights, functions and responsibilities in our mission to develop high standards of professionalism, accountability, risk management, efficiency, innovation and competitiveness in the capital market. We believe that the presence of all of these attributes is cardinal if the financial derivatives market in Malaysia is to be successful in serving the needs and preferences of market participants.

Derivatives are by no means a new global phenomenon. Historians can trace the origins of futures contracts in Japan back to 1697. Informal marketplaces in the United States and Europe have existed for a number of centuries to facilitate the transfer of farmers' exposure to future price fluctuations. The Chicago Board of Trade (CBOT) was the first futures exchange to be established in the world in 1848. The CBOT was set up originally to provide a place where grain merchants could meet to trade in futures contracts according to standard contract sizes, quality, delivery as well as a set of uniform rules.

Financial derivatives, although a more recent phenomenon, have eclipsed physical commodity futures and options since their emergence in the Chicago exchanges in the 1970's. On exchanges worldwide, the total turnover of futures and options contracts based on currencies, interest rates, bonds and equities dominate trading.

With the official release of the Securities Commission's guidelines for the issue of call warrants on 6 December 1994, I would like to reaffirm the Commission's policies with regard to the integration of financial derivatives into the Malaysian capital market. Our policies are broadly as follows:

First, the Commission is committed to encouraging the orderly development of an innovative and competitive Malaysian capital market. In the execution of this mission, the Commission adopts a policy that is open and receptive to contemporaneity and change in our review of proposals for new and innovative instruments, including derivatives, as the needs and objectives of industry participants have been and will be our foremost consideration. Come to us and we will lend you our ear. To this end also, the Commission shall continually review and update its guidelines and regulations to keep our capital market on the cutting edge.

Secondly, the Commission sees greater liquidity in the nation's stockmarket as a natural safeguard for the pricing mechanism. A highly capitalised stock with a large amount of public float reduces the impact that artificial stimuli would have on the price of a particular stock. The existence of equity derivatives will provide arbitrage, spread and risk management opportunities which will in turn enhance the liquidity of the underlying instruments. High liquidity too would attract portfolio fund managers to whom the ease of moving funds is a concern.

Thirdly, the Commission recognises that derivatives form an integral part of any developed capital markets system. We will work towards facilitating the introduction of a wider array of instruments to cater for different investor risk/reward profiles.

Fourthly, arbitrage practices between the cash and derivatives markets will also lead to greater pricing efficiency in the cash market. A healthy development of, and professional approach to, these instruments will, we believe, enhance the efficiency of pricing and evaluation of our capital market.

Last, but no less important, the Commission would like to foster and encourage professionalism in the marketplace. Our vision encompasses a market environment in which intermediaries and participants act in a professional and responsible manner towards the collective development of the capital market for the benefit of all who view their presence in the market as a long term one. Initially, derivatives may introduce an additional layer of complexity to the analysis and perception of risk; hence market intermediaries should assume responsibility in highlighting risk to less sophisticated investors.

Coming back to the theme of today's seminar, "Call warrants: A new instrument for the Malaysian capital market", I would like to share with you the Commission's belief that call warrants could herald a paradigm shift in the perceptions and analyses of risk by Malaysian market institutions and intermediaries. At present, they measure risk in a linear fashion. The advent of options will necessitate the use of advanced non-linear financial mathematics to value the instruments and manage the risks inherent in them. These principles, which are no stranger to institutions operating in developed capital markets, would accustom users of derivatives to viewing risks in activities, hitherto taken for granted, in a different light that will allow for easy identification and proper management of those risks. We believe that this will be a major milestone in our journey towards achieving completeness in our capital markets system.

The imminent foray into exchange-traded options and futures will mark the coming of age of Malaysia as a regional financial centre. The introduction of call warrants, as a forerunner to exchange-traded derivatives, will give market intermediaries and institutions an opportunity to prepare for competitive participation in the anticipated exchanges (namely the Kuala Lumpur Options and Financial Futures Exchange [KLOFFE] and the Kuala Lumpur Futures Market [KLFM]).

This seminar serves to bring together experts on derivatives, Malaysian and international market intermediaries and institutions, regulatory agencies and prospective investors in call warrants. We hope that it will benefit those who have come to learn more about call warrants and the regulatory framework applicable to them, provide a forum for issues to be raised and facilitate the exchange of ideas and opinions.

Before we embark on that process, I would like to highlight the continuing role that the Securities Industry Development Centre will play in educating market participants. Apart from organising seminars such as this, the SIDC will also play a pivotal role in the training of market intermediaries. A longer term objective will also be to serve as a resource centre to the industry.

Finally, I would like to thank the representatives of Bank Negara Malaysia, the Registry of Companies, the Kuala Lumpur Stock Exchange and the Foreign Investment Committee who are present here today, not to mention the speakers who graciously accepted our invitation to impart their knowledge and experience. I am certain that you will not be disappointed with the level and quality of the discussions that will take place in this hall today.

Thank you.