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Malaysia to develop “more vibrant” ETF market

Malaysian regulators have noted the benefits of ETFs and given recommendations aimed at incentivising new issuance, according to a statement from the regulator.

To attract more ETF issuers, a task force led by the Securities Commission of Malaysia (SC) recommends lowering the minimum capital requirement for ETF issuers to RM2m ($465,603) from RM10m.

The task force also recommends the broadening of ETF distribution channels by permitting financial institutions, online platforms and financial planners to offer ETFs to clients via stock brokerage firms. The expansion of the distribution channel should provide investors greater access to a more diverse range of products at a lower entry cost, the regulator said.

The SC and Bursa Malaysia will also be providing rebates and waiving relevant fees applicable to ETF market makers, including a 100% clearing fee rebate by both entities.

Besides relaxing regulations, the task force also wants to see new types of ETFs. According to the regulator, it will facilitate the introduction of futures-based and conventional commodity-based ETFs, as well as leveraged and inverse ETFs, to investors.

Bursa Malaysia is also expected to conduct more roadshows in the country and investor education programmes to attract more investors, it added.

The various initiatives and recommendations are expected to be implemented by the end of this year, the regulators said.

“SC will work with the relevant stakeholders to implement these measures and develop a more vibrant ETF market that provides greater opportunities and options for investors and issuers,” Zainal Izlan Zainal Abidin, SC’s managing director of development and Islamic markets and chair of the task force, said in the statement.

In Malaysia, there are only eight ETFs – three are equity ETFs, four Shariah-compliant equity ETFs and one fixed income ETF, according to Bursa Malaysia’s website. There are only three fund management firms that manage ETFs, which are AmInvest Services, I-Vcap Management and CIMB-Principal Asset Management. 

The ETF task force, which is chaired by the SC and comprising Bursa Malaysia, fund managers, market makers and institutional investors, was set up to spur the development and competitiveness of the ETF market.

Part of the Mark Allen Group.