On 7 June 2023, Bursa Malaysia Securities Berhad (“
the Exchange”) announced
amendments to Directive No. 8.22(5)-001 (Directives on Regulated Short Selling – Approved Securities) (“
Directive 8.22(5)-001”) in relation to the criteria for Approved Securities for Regulated Short Selling (“
Approved Securities”).
1
The key amendments are as follows:
- revising the daily market capitalisation criterion of an Approved Securities for the preceding three months from RM500 million to RM200 million2 (“Market Capitalisation Amendment”) by amending paragraph 1.1(1)(b) of Directive 8.22(5)-001; and
- declaring all listed Exchange Traded Funds (“ETFs”) as Approved Securities, with the exception of Inverse ETF3 (“ETF as Approved Securities Amendment”) by introducing a new paragraph 1.2 to Directive 8.22(5)-001.
The new paragraph 1.2 of Directive 8.22(5)-001,
inter alia, provides that:
- all ETFs admitted to the Official List are Approved Securities except for Inverse ETFs (“Eligible ETFs”);
- Eligible ETFs are not subject to the criteria set out in paragraphs 1.1(1) and 1.1(2) of Directive 8.22(5)-001;4 and
- all provisions in the Rules and Directives of Bursa Malaysia Securities Berhad which are applicable to the trading of Leveraged ETFs5 shall apply to the Regulated Short Selling and Intraday Short Selling of Leveraged ETFs.
The Market Capitalisation Amendment came into effect on 12 June 2023 and the ETF as Approved Securities Amendment will come into effect on a date to be announced by the Exchange.
Comments
The above amendments are part of the Exchange’s initiatives to enhance liquidity and vibrancy in the domestic capital market. The amendments are likely to significantly increase the number of Approved Securities that will be eligible for Regulated Short Selling. As the list of Approved Securities also applies to Intraday Short Selling, the amendments will likewise increase the number of securities that are eligible for Intraday Short Selling
6.
Alert by Phua Pao Yii (Partner) and Tan Wei Liang (Senior Associate) of the Corporate Practice of Skrine.
1 The full text of the amendments to Directive 8.22(5)-001 can be accessed
here.
2 The market capitalisation criterion is one of four criteria stipulated in paragraph 1.1(1) of Directive 8.22(5)-001 that have to be satisfied for listed securities to qualify as “Approved Securities”.
3 Paragraph 2.01 of the Securities Commission Malaysia’s Guidelines on Exchange-traded Funds defines an “inverse ETF” as an ETF whose aim is to deliver the opposite of the daily performance of the index or benchmark being tracked.
4 Paragraph 1.1(1) sets out the criteria for listed securities to be Approved Securities and paragraph 1.1(2) sets out the criteria that have to be fulfilled for newly listed securities to be declared as Approved Securities.
5 Paragraph 2.01 of the Securities Commission Malaysia’s Guidelines on Exchange-traded Funds defines a “leveraged ETF” as an ETF whose aim is to deliver multiples of the daily performance of the index or benchmark.
6 Rule 1.01 of the Rules of Bursa Malaysia Securities Berhad and Questions 3 and 4 of the Frequently Asked Questions on Short Selling issued by the Exchange provide that “Approved Securities” in relation to Regulated Short Selling and Intraday Short Selling means any of the securities traded on the stock market of the Exchange that is declared by the Exchange as such under Rule 8.22(5).