Bursa Malaysia expands market making framework

17 December 2020

On 7 December 2020, Bursa Malaysia Berhad (“Bursa Malaysia”) announced the expansion of its market making framework by way of amendments made to:

  • the Rules of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“Rules”);
  • the directives issued to companies that carry on the business of trading in securities on Bursa Securities’ stock market and are admitted as Participating Organisations under Rule 3.02 of the Rules (“Participating Organisations”) (“Directives”); and
  • the Participating Organisations’ trading manual.

Salient amendments made to the Rules include the following:

  • Expanding the qualification criteria for foreign entities to participate as market makers;
  • Introducing a new category of market makers called “Derivatives Specialists” who will be allowed to utilise the Permitted Short Selling (“PSS”) framework for the purpose of market making; and
  • Expanding the PSS framework to allow short selling by the market makers of structured warrants (“SW”), single stock futures contract (“SSF”) and stock option contract (“SSO”) in respect of the underlying securities of SW, SSF and SSO which are Approved Securities. Approved Securities refer to any of the securities traded on the stock market of Bursa Securities that are declared by Bursa Securities as such under Rule 8.22(5) for regulated short selling (“RSS”) and intraday short selling.

Salient amendments made to the Directives include amendments:

  • in relation to an application as a Derivatives Specialist;
  • to clarify that if the securities eligible for day trading under the Directive are also securities eligible for PSS and a suspension on PSS is imposed on the said securities, the short selling under the Directives will be suspended as well; and
  • to clarify that the 10% total net short positions limit imposed on the RSS applies to PSS as well. Hence, RSS and PSS have a combined net short aggregated positions limit.

A full list of the amendments can be found in the Participating Organisations’ Circular No. R/R 13 of 2020 which was issued on 24 November 2020.