Guidelines on Exchange Traded Funds
On 26 November 2018, the Securities Commission (“SC”) announced a revision to the Guidelines on Exchange Traded Funds (“Revised Guidelines”) which will pave the way for the issuance of a more diversified range of exchange traded funds (“ETFs”) in Malaysia. The Revised Guidelines, which will come into effect on 2 January 2019 (“Effective Date”), allow asset managers to offer a wider array of ETFs which includes futures-based ETFs (including leveraged and inverse ETFs), synthetic ETFs and commodity ETFs. A number of key changes have been made in the Revised Guidelines, in particular:-
In addition to the above, other changes include (i) requirements to allow the establishment of multiple classes of units within an ETF; (ii) requirements to allow for both cash or in-kind creations and redemptions, or a combination of cash and in-kind creations and redemptions; (iii) a new requirement to allow Islamic ETFs to participate in Islamic Securities Selling and Buying – Negotiated Transaction (“ISSBNT”) activities.
Main Market Listing Requirements & Bursa Malaysia Securities Berhad Rules and Directives
In tandem with the Revised Guidelines, on 7 December 2018, Bursa Malaysia Securities Berhad (“Bursa”) announced enhancements to the ETF framework by way of amendments to the Main Market Listing Requirements (“MMLR”) and Bursa Malaysia Securities Berhad Rules and Directives (“Bursa Rules & Directives”). These amendments will similarly come into operation on the Effective Date.
The amendments to the MMLR and Bursa Rules & Directives aim to facilitate the trading of the new types of ETFs on Bursa. Some key changes include:
Given the above developments and revisions and the limited time before these changes will come into effect, relevant parties (e.g. asset managers, management companies, advisors and trustees) are advised to promptly ascertain how these changes may affect their businesses to ensure full compliance with the relevant regulatory requirements prior to the Effective Date.
If you have any queries arising from the above developments, please do not hesitate to get in touch with our team.