Bursa Malaysia plans T+2 settlement period, follows Singapore

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KUALA LUMPUR: Bursa Malaysia is seeking public feedback to reduce the settlement period to two days(T+2) from the current three-day cycle (T+3), following the Singapore Exchange (SGX) which will impose it on Dec 10.

It said on Monday the proposal is part of Bursa Malaysia’s ongoing efforts at improving operational efficiency, reducing systemic risks and aligning the clearing and settlement processes of the Malaysian capital market with international practices. 

“Bursa Malaysia is targeting to introduce the changes by the second quarter of 2019. 

Bursa Malaysia said the review to migrate from a T+3 to T+2 settlement cycle was initiated to keep pace with changing trends of the market and needs of market participants and investors. 

It said among the benefits of the proposed T+2 settlement cycle includes: 

• Improved operational efficiency, where the shorter settlement period avails securities and funds earlier for investors.

• Reduced counterparty settlement risk as a result of shorter exposure to unsettled trades from three days to two days. 

• Strengthened competitiveness of our marketplace through harmonisation of post-trade infrastructure with major global exchanges in the US, Europe and Asia-Pacific which already operate a T+2 settlement cycle. 

Bursa Malaysia said the Rules of Bursa Malaysia Securities Berhad and the Rules of Bursa Malaysia Securities Clearing Sdn Bhd would have to be amended to facilitate the move from a T+3 to a T+2 settlement cycle. 

“Interested parties and the public are invited to submit their comments and feedback to Bursa Malaysia by Dec 28, 2018,” Bursa Malaysia said.

Details of the consultation paper are available at: http://www.bursamalaysia.com/misc/system/assets/25925/ConsultPaperT2Settlement.pdf

On Nov 13, SGX had announced it would launch a new securities settlement and depository framework and system on Dec 10, 2018, enabling a shorter securities settlement cycle of two days (T+2) and simultaneous settlement of money and securities.

“Moving from a T+3 to a T+2 settlement cycle will harmonise Singapore’s stock market with that of global markets including Australia, the European Union, Hong Kong and the US. Other improvements that investors can expect include the simultaneous settlement of securities and money, and the streamlining of Central Depository Pte Ltd (CDP) notifications,” according to the SGX statement.