Bank Negara adopts more transparent spot-fixing method for US$/ringgit

  • Banking
  • Wednesday, 15 Jun 2016

Money changer worker Mariam Beebi Shaik Uduman,33 counting the dollar using the bank note machine at the Central Market money changer in Kuala Lumpur, yesterday. The Ringgit is spreading thinner after breaching the RM4.00 mark against the US dollar the lowest level since September 1998. MUHAMAD SHAHRIL ROSLI/SThe Star. (Stand Alone)

KUALA LUMPUR: Bank Negara Malaysia (BNM), in collaboration with the Financial Markets Association of Malaysia (FMA), has introduced a new methodology in the US dollar/ringgit (USD/MYR) spot fixing, which is based on market transaction data rather than submission of quotations by selected banks.

In a statement, the central bank said the move, effective from July 18. was part of the effort to adopt global best practices for the domestic financial market.

Under the new methodology, the reference rate will be known as Kuala Lumpur USD/MYR Reference Rate.  

To be published daily at 3:30pm, it is computed based on weighted average volume of the interbank USD/MYR forex spot rate transacted by domestic financial institutions between 8:00am to 3:00pm (this includes BNM’s transactions with interbank forex market participants).

“The market transaction data is sourced from online reporting by domestic financial institutions to BNM. The new methodology is more transparent and better reflects underlying trades during the day,” it said.

The official closing hour for onshore ringgit market will also be extended by an hour to 6pm effective on the same date. 

“This will give businesses additional time to complete their foreign exchange transactions. Nevertheless, the onshore market participants can continue to transact after the official closing hour,” BNM said.

The Kuala Lumpur USD/MYR Reference Rate will be published under a parallel trial on Reuters page KLMYRREF starting from June 20 although it will be effective only from July 18. BNM said this parallel period allowed for the market transition process.

On the effective date, the Kuala Lumpur USD/MYR Reference Rate will assume the current PPKM-MYR page on MYRFIX02 and continue thereafter.

BNM and FMA expect a smooth migration without any disruptions. 

BNM director of investment operations and financial market Adnan Zaylani said these enhancements in the Malaysian financial market infrastructure followed from the ongoing collaboration with the FMA, and were among the first few initiatives discussed at the Financial Market Committee, an inclusive forum for all financial market stakeholders to further develop and improve the Malaysian financial markets.

FMA president Lee K. Kwan said the Kuala Lumpur USD/MYR Reference Rate. which is based on market transaction data rather than submission of quotations by selected banks in the previous methodology, represents comprehensively all interbank forex transactions conducted during the trading period. 

“This initiative elevates the USD/MYR FX benchmark rate setting process to global best practices, ensuring that the FX spot reference rate is well received domestically and internationally, contributing to the further development of the Malaysian financial markets,” he added.
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