SBL 

Securities lending in listed equities was introduced in Malaysia in January 2007 and is available to foreign investors. 

An enhanced lending model that offers an option to borrow and lend on an OTC basis was introduced in August 2009, under which the lender and borrower are able to directly negotiate and agree the terms. 

These transactions must, however, be reported via onshore borrowing and lending representatives and facilitated through Bursa Malaysia Securities Clearing Sdn Bhd (BMSCSB), notes Thomas Murray Data Services. 

Only securities that are specified by the approved clearinghouse are eligible for borrowing and lending transactions. 

More recent announcements by the Malaysian Securities Commission (Suruhanjaya Sekuriti Malaysia) on the Capital Markets and Services (Amendment) Act 2015 (CMSA) relate to netting provision of ‘qualified capital market agreement’ on securities-based lending transactions. 

The International Capital Market Association (ICMA) has already engaged counsel for an opinion relating to GMSLA/GMRA, which is currently outstanding notes Martin Corrall, regional product head for securities finance Citibank & chairman of Pan Asia Securities Lending Association. 

Success in Malaysia is dependent on robust risk management, says Rob Lees, co-head securities lending trading Brown Brothers Harriman. “Given some of the nuances and regulatory complexities, particularly around settlement fails, ensuring the right balance between risk and revenue maximisation is critical for beneficial owners.” 

Paul Solway, BNY Mellon head of securities finance Asia Pacific markets group describes Malaysia as the “new kid on the block” in terms of securities lending with a capital market that is progressively establishing itself within the region. “This is also the newest market to open offshore lending,” he says. 

An update on the Malaysian securities lending market issued by CIMB last year notes that most participants are offshore houses, with only one domestic participant leading to limited supply and demand onshore. 

There is an acknowledgment of the need to encourage local fund managers to participate in lending programmes and incentivise local institutions to participate to increase demand. Potential future developments include the introduction of Islamic securities based lending to Shariah fund managers. 

EquiLend refers to increased interest in the Malaysian securities lending market and has started to see trading through its platform, says Andrew McCardle, head of EquiLend Asia. “There is more interest from the domestic community in how they can better integrate into the global market,” he adds. 

A number of initiatives were introduced during 2014 to enhance the competitiveness and efficiency of the Malaysian capital market, including the auto-closure of dormant central depository accounts and the mandatory reporting on ringgit assets held by non-resident ultimate beneficial owners, namely for debt securities and cash deposits. 

Repo 

Repo has been established for real time electronic transfer of funds and securities (RENTAS) since December 2001. Non‐residents are allowed to participate in the repo facility. The maximum tenure for repo is 365 days and the settlement procedure is conducted through RENTAS on a delivery versus payment (DVP) and delivery versus delivery (DVD) basis.