THE Securities Commission (SC) yesterday announced further liberalisation to Central Depository System (CDS) account requirements to promote greater trading efficiency in Bursa Malaysia.
The move will permit a wider group of persons to hold securities on behalf of others and in omnibus CDS accounts.
“The increased ability to pool securities into one CDS account will promote greater trading efficiency in the Malaysian market.
“Additionally, this liberalisation of CDS account requirements will enhance the international competitiveness and vibrancy of the Malaysian capital market, contributing towards the promotion of market liquidity,'' said the SC in a statement yesterday.
“The move towards the further liberalisation of securities account structure requirements is timely given today's economic recovery, extensive improvements to the stock exchange's reporting requirements and significantly better information-sharing arrangement that have been established between Malaysian regulatory bodies and authorities in other jurisdictions since 1998.''
The SC said with the liberalisation of the CDS accounts, stockbroking companies and authorised nominees were expected to practise due diligence standards aligned with international best practise.
This is particularly stringent application of “know-your-client” rules to ensure that any information that is required by regulatory authorities on stock market transactions and identities of those behind such transactions can be obtained as and when necessary.
The latest move to relax trading structures comes on the back of other efforts to lift trading of stocks on and the profile of Bursa Malaysia.
The SC recently granted licences to five foreign brokers to start operations in the country. So far, two have begun trading.
More efforts are also being directed to lift the stock market's velocity, and Bursa Malaysia is studying whether to allow direct market access for clients of foreign brokers and has proposed bringing back regulated short selling.
Citibank Bhd, which is the largest provider of custodian services in the country, feels the liberalised CDS requirements are beneficial to institutional investors.
The bank's vice-president, and securities country manager for global transaction services, Lau Chee Kin, said the previous CDS account system was for intermediaries to keep individual segregated depository accounts for foreign investors every time they bought shares on Bursa Malaysia.
He said the new process would eliminate the need for multiple accounts, especially on the part of intermediaries by operating a common omnibus depository account to hold the investments.
Foreign funds, however, still have to maintain the end details of the beneficial owners.
“The cost reduction (for the intermediaries) can be substantial in the longer term due to operational efficiency,'' he said, adding that the latest move made Bursa Malaysia more investor friendly.
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