Bursa Malaysia Securities Berhad (‘the Exchange
’) amended the Rules of Bursa Malaysia Securities Berhad (‘the Rules
’) and Directive 7.40-001 (Trading in Leveraged and Inverse Exchange Traded Funds) of the Directives of Bursa Malaysia Securities Berhad (‘Directive 7.40-001
’) with effect from 20 January 2023
for onboarding of clients by a Participating Organisation (‘PO
’) for trading in Leveraged Exchange Traded Funds1
and Inverse Exchange Traded Funds2
(collectively ‘L&I ETFs
Amendment to the Rules
The Rules were amended by replacing sub-rules (1) and (2) of Rule 7.40 with the following:
‘Leveraged ETFs or Inverse ETFs (referred to collectively in this Rule as “L&I ETFs”) are only intended for trading by investors who satisfy such qualifying criteria and requirements as may be prescribed by the Exchange.’ (Emphasis added)
Amendments to Directive 7.40-001
The amended paragraphs 1(2) to 1(5) of Directive 7.40-001 now provide, inter alia
, as follows:
1(2) Pursuant to Rule 7.40, a client must meet the following criteria (‘qualifying criteria
’) for trading in L&I ETFs units:
1(3) Pursuant to Rule 7.40, a PO must ensure that a client provides the following documents to the PO before trading in L&I ETFs units:
1(4) Notwithstanding paragraph 1(3), if a PO subsequently receives information that the client does not fulfil any of the qualifying criteria, the PO must not allow such client to further trade in L&I ETFs units except to liquidate the current positions.
1(5) The requirement in paragraph 1(3) does not apply to a client who falls within the list in Appendix 2 of Directive 7.40-001.
Appendix 2 of Directive 7.40-001 provides that each of the following is exempted from complying with paragraph 1(3) of the Directive 7.40-001:
Apart from the introduction of a new directive on cessation of trading in paragraph 1(4) of Directive 7.40-001, the recent amendments to the Rules and Directive 7.40-001 consist mainly of a consolidation of the provisions of paragraphs 1 and 2 of Directive 7.40-001 into paragraph 1 of the amended directive.
The full text of the amendments to the Rules and Directive 7.40-001 can be accessed here
Alert by Kok Chee Kheong (Partner) of the Corporate Practice of Skrine.
A Leveraged Exchange Traded Fund aims to deliver multiples of the daily performance of the index or benchmark (paragraph 2.02 of the Securities Commission Malaysia’s Guidelines on Exchange Traded Funds).
An Inverse Exchange Traded Fund aims to provide return or performance that is opposite of the daily performance of the index or benchmark being tracked (paragraph 2.02 of the Securities Commission Malaysia’s Guidelines on Exchange Traded Funds).
A Sophisticated Investor is a person who falls within any one of the categories of investors set out in Part I, Schedule 6 or 7 of the CMSA.
A Margin Account is an account maintained by a client with a PO to finance, inter alia
, the subscription and purchase of securities.