Ladies and Gentlemen, esteemed colleagues, and distinguished guests,
- Good morning and a very warm welcome to the inaugural Dialogue between the Securities Commission Malaysia and the World Federation of Exchanges (WFE). I hope you are enjoying your stay in Malaysia.
- This marks the first opportunity SC Malaysia has had to officially collaborate with the WFE, the global industry association for exchanges and clearing houses.
- The Dialogue comes at an important time as Malaysia prepares to assume the Chairmanship of ASEAN in 2025, where I will chair the ASEAN Capital Markets Forum (ACMF), comprising capital market regulators from the ten ASEAN member states.
- The aim of today’s closed-door Dialogue is to bring together the heads of global regulators and exchanges to foster an open and candid discourse on some of the key emerging issues shaping our markets and our respective roles within them.
- I would like to thank WFE’s CEO, Nandini Sukumar and her team for collaborating closely with the SC to make this event possible.
- I would also like to acknowledge my esteemed regulatory peers for joining us at this Dialogue:
- Lim Tuang Lee, Assistant Managing Director of Capital Markets, Monetary Authority of Singapore;
- Khun Jomkwan Kongsakul, Deputy Secretary-General, Securities and Exchange Commission of Thailand;
- Brad Douglas, Head of Markets, Strategy and Risk, Dubai Financial Services Authority; and
- Tatiana Didier, Senior Economist, the World Bank’s Inclusive Growth and Sustainable Finance Hub in Malaysia.
Strengthening Collaboration between Regulators and ExchangesLadies and Gentlemen,
- As a long-standing Board member of IOSCO, the global standard-setting body for financial markets regulation, the SC is at the forefront to some of the key emerging regulatory issues impacting our markets.
- My fellow Board members, Tuang Lee and Ian Johnston and I participated in the IOSCO Board meeting in Madrid earlier this month, where we aim to bring regional and emerging markets’ perspectives to the Board discussions to ensure the issues reflect the context of our markets.
- The profound changes in the capital markets ecosystem, 3 areas of which we are covering today namely:
- The interplay between private markets and public markets;
- Accelerating the growth of sustainable finance, including mitigation, adaptation and resilience; and
- The integration of innovation and next-generation technology; demand new ways of thinking and acting, both from regulators and exchanges, even more so, where the roles of exchanges and regulators are inherently intertwined.
- Regulated exchanges are not merely venues for trading; you are the frontline regulators of our markets.
- You have a role to play in ensuring fair, secure and accessible markets that is vital to create strong financial markets, while ensuring investors remain protected.
- There is a positive correlation between well-functioning financial markets and economic development.
- Together, we have a responsibility to deliver on our objectives that will help shape the resilience, inclusivity and sustainability of our markets.
Private Markets and its Interplay with Public Markets Ladies and gentlemen,
- Let us examine the first topic for today’s Dialogue i.e. the interplay between private and public markets.
- Over the last decade, we have witnessed a significant shift in capital formation trends.
- There is a growing trend of companies favouring alternative sources of financing such as Private Equity and Venture Capital as opposed to traditional bank lending.
- Private markets have largely grown in a period of accommodative macro-financial conditions.
- This is reshaping the dynamics of today’s businesses and creating new capital raising avenues.
- According to The Investment Association, private markets have experienced rapid growth in recent years, rising 22% in 2021 alone to reach over US$10 trillion in global assets under management (AUM)1.
- It has been estimated that AUM of private markets could reach a total of US$13 trillion by 20272, reflecting a growing preference for private funding avenues.
- This rise poses both challenges and opportunities for public markets.
- Exchanges have long served as cornerstones of our financial system, providing essential platforms for indirect capital flow through listed instruments such as ETFs and SPACs.
- They also play a vital role in offering exit opportunities for private investments, most notably through IPOs.
- How do regulators and exchanges see the growth of private markets? How do we then foster the synergies between private and public markets?
- This dialogue is a timely opportunity to address these evolving dynamics.
Sustainable Finance- Next is the area of sustainable finance, and the ability of markets to shape a sustainable future.
- Global momentum around sustainability has been remarkable.
- In the past year alone, the global sustainable investment market reached US$30 trillion, representing a 15% increase from the previous year3.
- Investors are increasingly seeking opportunities that align with their values, and this shift is reshaping the landscape of capital markets.
- With the launch of the ISSB Standards this year, a key area of focus has been on the disclosure of credible, consistent and comparable sustainability-related information.
- Another important area is in the context of mitigation and adaptation.
- As we continue to witness catastrophic climate-related events in our region and beyond, we need to ensure that capital flows for climate transition and adaptation, while building resilience against climate-related risks.
- In Malaysia, our aim is to build a capital market ecosystem that supports sustainable and inclusive economic development.
- An observation reinforcing the importance of the Malaysian capital market is that our combined sukuk and equity market is now over RM4 trillion and is larger than banking assets of about RM3.7 trillion.
- Last year, the SC introduced the Maqasid Al-Shariah Guidance for the Islamic Capital Market to position Malaysia as a regional centre for Shariah-compliant SRI.
- These principles – focusing on protecting faith, life, intellect, progeny and wealth, offer a simple yet compelling framework to ensure finance benefits society as a whole and are based on Islamic Shariah principles.
- These principles are embedded in our SRI Sukuk framework, and we intend to embed them into product development and the upcoming Social Exchange.
- As regulators, we are able to build facilitative frameworks to guide our markets towards sustainability; however, the onus also lies with exchanges to develop innovative solutions that meet the growing demand for sustainable investments.
- Bringing efficiency and market expertise to the table, this will help complement governments’ efforts to support decarbonisation goals and address the funding gap needed for adaptation and mitigation projects.
- Initiatives like the Sustainable Stock Exchanges (SSE) initiative have shown us the potential for exchanges to lead the way in advocating ESG.
- By working together, we can develop policies and initiatives that encourage issuers to adopt sustainable practices while providing investors with the confidence they need to support these initiatives.
Innovation and Next Generation Technology- And thirdly, the topic of innovation and next-generation technology in exchanges presents an exciting avenue and are at the heart of the future exchange landscape.
- Advancements such as blockchain-based settlement to AI-driven surveillance, these innovations offer us tools to increase efficiency, broaden access, and improve transparency.
- It is reshaping how we think about trading, clearing, and settlement.
- According to recent studies, the global blockchain market size was valued at US$17.57 billion in 2023, is projected to grow from US$27.84 billion in 2024 to US$1 trillion by 20324, indicating a seismic shift in how financial transactions are conducted.
- At the same time, they require us to rethink regulatory frameworks to manage new risks and challenges.
- This session will delve into these questions and explore the new themes of market integrity, cybersecurity and digital inclusion.
- It will also address what it means for regulators to be future-ready, as we navigate technologies that will redefine what it means to have fair, efficient, and accessible markets.
ConclusionLadies and Gentlemen,
- Today’s Dialogue is a platform for sharing ideas, insights, and best practices aimed at strengthening our partnerships.
- The success of our global markets depends on our ability to adapt, innovate, and respond to the needs of the future together.
- I would like to again thank the World Federation of Exchanges for their partnership and commitment to fostering collaboration among regulators and exchanges globally.
- I look forward to an engaging and productive discussion. Thank you.
