Transcript Malaysia

Securities Borrowing & Lending
&
Regulated Short Selling
in Malaysia
PASLA Conference - March 2014
Framework
SECURITIES BORROWING AND LENDING (SBL)
• There are currently two SBL models;

SBL – Central Lending Agency (SBLCLA) Model where the Clearing
House acts as the central lending agency for all SBL activities.

SBL – Negotiated Transaction (SBLNT) that offers an option to borrow
and lend on an over-the-counter (OTC) basis.
Page 14
Framework (Continued)
SECURITIES BORROWING AND LENDING (SBL) MODELS
SBL Central Lending
Agency (CLA) Model
Principal relationship
Principal relationship
Lend
Information-
Lend Information
Fee
Fee
TCP
NTCP
Shares
Shares
TCP = Local Brokers
NTCP = Local Custodians
Lending
Representative (LR)
DESIGNATED TCP
CDS A/C
RSS Trades
Potential Fail
Trades
Bursa Securities Clearing
(CH)
Borrowing
Representative (BR)
– Local Broker
NTCP
Borrowers
Fee
Collateral
DESIGNATED MM
ETF CDS A/C
PSS Trades (AB is a PD
for ETF)
Borrow
Information
Approved
Borrower (AB)
TCP
AL’s CDS A/C
Shares
TCP = Local Brokers
NTCP = Local Custodians
DESIGNATED
RSS/SBL CLR CDS
A/C
Borrow
Information
Lend Information
TCP
Fee
Authorised
Borrower(AB)
(TCPs)
Principal relationship through OTC SBL Agreement
Lend Information
Approved
Lender (AL)
Bursa Securities Clearing
(CH)
Collateral
Lender’s CDS
A/C
SBL Negotiated Transaction (NT) Model
Borrow
Information
Borrow
Information
Lending Agent (LA)
Lender
Principal relationship
DESIGNATED RSS/SBL CDS
A/C
RSS Trades
DESIGNATED MM-ETF
CDS A/C
PSS Trades
(AB is a
MM for ETF)
Page 15
Recent Changes in SBL
1) New Regulation and Withholding From Buying-in Facility
i)
The introduction of a new Regulation to allow Sale before Recall
In general, a person must not sell securities unless he has reasonable grounds to believe he has a right to vest the securities in a
purchaser.
A new Regulation was introduced on 9 January 2012 which allows SBL lenders to sell the loaned securities before recalling the loaned
securities from the borrower provided the sale of the loaned securities is settled on the settlement date (T+3).
ii)
The introduction of Withholding From Buying-in Facility
The obligation to deliver the shares by Lender for the “Sell” transaction is on T+2, whereas the Loan Return arising from a recall can only
be initiated by a SBL Borrower on T+3 when the securities purchased from the market are credited into his account. This will result in
Lenders being unable to deliver for the “Sell” transaction on T+2.
The following diagram gives an illustration of this process:
T
1
Lender
2
Sells Loaned
Securities
Recalls
Loan
Receive Recall
Notice
Purchase
Securities
For
4
Return to
Lender
T+1
T+2
7
Need to deliver loaned
securities for
settlement
(cut off by 4.30pm)
3
Borrower
T+3
5
Received
securities
during settlement
(after midnight)
Receive
Recalled loaned
securities after the
settlement delivery
deadline
6
Return loaned
Securities to
Lender
Page 6
Recent Changes in SBL (Continued)
What happens with the introduction of the Withholding From Buying-in Facility?
This facility is to provide SBL Lenders to withhold their sell transaction from being bought-in when the SBL loaned securities is sold and
recalled on the same day. The withholding from buying-in will be effective for one (1) business day only (T+3).
The following diagram gives an illustration of the withholding from buying-in process:
T
Sells
Loaned
Securities
Lender
Recalls
Loan
T+1 and T+2
Lending
Agents/Representatives
will have to enter the
Withholding From Buyingin request into the SBL
system
T+3
Withholding from
buying-in
effected
T+4
Lender will be
subjected to buying-in
if SBL recalled
securities is not
delivered
The introduction of the Withholding From Buying-in Facility was implemented to the 2 SBL systems on the following dates:
SBLNT - 13 January 2012; and
SBLCLA - 30 March 2012.
Page 7
Recent Changes in SBL (Continued)
2. Exemption of Substantial Shareholding Reporting
Substantial shareholding reporting is a requirement when an investor has an interest of 5%
or more of the aggregate (total) voting shares in a company.
As SBL is deemed to be a loan the Companies Commission of Malaysia has exempted this
reporting requirement for Lenders.
3. Liberalisation of Criteria for Eligible/Approved Securities for SBL and RSS
With this liberalisation, there is a remarkable increase in the number of Eligible/Approved
Securities for SBL and RSS, from 100 previously to 218 currently.
4. Permitted An Approved Reasons For Transfer Arising From Corporate Actions
This permits a borrower to return the relevant securities received arising from corporate
actions back to lender under the No Change In Beneficiary Owner approved reasons.
5. Publication on the Exchange website
Daily RSS trades are currently published on the Bursa Malaysia’s website
SBL – Monthly Outstanding Position
RM’Millions
RM1,699,069,665
1800
1600
1400
1200
1000
800
600
400
200
0
Jan-12
Total Value
3.7
(RM' Million)
Feb- MarMayAug- SepNov- DecFeb- MarMayAug- SepNov- DecApr-12
Jun-12 Jul-12
Oct-12
Jan-13
Apr-13
Jun-13 Jul-13
Oct-13
12
12
12
12
12
12
12
13
13
13
13
13
13
13
3.9
4
5
195
251
277
295
390
445
361
450
410
442
513
488
487
640
690 1,188 1,111 1,558 1,610 1,699
Notes:
• Based on market value of outstanding loans as at last trading day of the month
7
RSS Monthly Trading Activities
RM’Millions
350
300
250
200
150
100
50
0
Jan-12
RSS Value
(RM' Million)
0
Feb- MarMayAug- SepNov- DecFeb- MarMayAug- SepNov- DecApr-12
Jun-12 Jul-12
Oct-12
Jan-13
Apr-13
Jun-13 Jul-13
Oct-13
12
12
12
12
12
12
12
13
13
13
13
13
13
13
0
0
0.7
35
48
24
22
59
50
23
71
14
53
55
127
70
293
73
283
176
156
193
211
8
RSS Value vs Market Value
December 2013

Average daily market RSS value
RM10,024,108

Average daily market value
RM1,507,205,070

% of RSS value vs Market Value
0.66%
Page 14
Challenges

Insufficient number of lenders to meet the demands of existing
borrowers

Lack of understanding and awareness
Page 14
Thank You
DISCLAIMER :
Bursa Malaysia and its Group of Companies (the Company) reserve all proprietary rights to the contents of this presentation. Whilst the Company
endeavours to ensure that the contents in this presentation are accurate, complete or have been obtained from sources believed by the
Company to be accurate and reliable, neither the Company nor the presenter make any warranty, express or implied, nor assume any legal
liability or responsibility for the accuracy, completeness or currency of the contents of this presentation. In no event shall the Company be
liable for any claim, howsoever arising, out of or in relation to this presentation."
© Bursa Malaysia 2013