Bursa Malaysia Securities Clearing Sdn. Bhd. (Bursa Clearing (S))
All transactions concluded by brokers on the Bursa Securities are netted- off through Bursa Clearing (S). This is Bursa Malaysia‘s wholly owned clearing subsidiary. Together with the Depository, Bursa Clearing (S) arranges the book-entry clearing, settlement and custody of transactions concluded on the Bursa Securities.
For equities and fixed income instruments listed on the Bursa Securities, the central depository is the Bursa Malaysia Depository Sdn Bhd. (Bursa Depository) For fixed income instruments traded and settled via the SSTS system, the depository is Bank Negara Malaysia (BNM).
Bursa Malaysia Depository Sdn Bhd (BMD)
BMD was established in 1992 under the Securities Industry (Central Depositories) Act, 1991 and operates under the purview of the Bursa Malaysia Berhad (previously known as Kuala Lumpur Stock Exchange). The BMD acts as the central depository for equities and corporate bonds. All shares listed on the Bursa Securities must be deposited with the BMD except for securities listed on stock exchanges recognized by Bursa Securities i.e. London Stock Exchange, Tokyo Stock Exchange and Copenhagen Stock Exchange.
All physical withdrawals of securities from the BMD are prohibited, except in cases allowed in the notices issued by the BMD (e.g.to facilitate – share buy back; conversion of debt securities; the process of company restructuring; rectification or errors, and also delisted securities).
The BMD operates the clearing and settlement book-entry system, Central Depository System (CDS). Securities are immobilized and registered in the name of the Bursa Malaysia Depository Nominees Sdn Bhd. Accounts may be maintained on a segregated basis according to beneficial owner or via omnibus accounts maintained on behalf of the instructing clients, through an Authorized Depository Agent (ADA) or an Authorized Direct Member (ADM). ADAs are member companies of the Bursa Securities and are allowed to maintain accounts on behalf of third parties. ADMs are banks, finance companies, insurance companies or other corporations as prescribed by the Ministry of Finance.
The main objectives of BMD are to:
* Establish and operate a system for the central handling of securities
* Increase the capacity of clearing and settlement of securities;
* Reduce the costs and risks of settlement of securities;
* Enhance the liquidity and efficiency of the Malaysian capital market; and
* Promote Malaysia’s competitiveness, by complying with the latest international standards for settlement and clearing of securities.
Bank Negara Malaysia in its capacity as the Depository for Scripless Securities Trading System (SSTS) eligible securities
Bank Negara Malaysia (BNM) is the depository for Scripless Securities Trading System (SSTS) eligible instruments e.g. Malaysian Government Securities (MGS), Malaysian Treasury Bills (MTB), Commercial Papers (CPs), Private Debt Securities (PDS), etc. The central bank of Malaysia, Bank Negara Malaysia (BNM) officially started operations on January 24, 1959 based on the Central Bank of Malaya Ordinance, 1958.
Payments in Malaysia occur by cheque, cashier’s order or inter-bank electronic transfer.
Inter-bank payment system: RENTAS (Real Time Gross Settlement)
In July 1999, Bank Negara Malaysia (BNM) implemented the Real-time Electronic Transfer of Funds and Securities system (RENTAS). RENTAS is a real-time gross settlement (RTGS) system in which both processing and settlement of funds transfer instruction take place continuously i.e.in real-time. All transfers are settled immediately, without netting debits against credit. Primarily an online real-time system designed to facilitate interbank transfers; the main feature of RENTAS is the instantaneous and irrevocable transfer of funds if sufficient balances are available in the respective bank’s settlement account with Bank Negara Malaysia (BNM).
The BNM-run RENTAS system operates from 09:00 to 18:00 Monday to Friday.
For amounts in excess of MYR 50,000, payment is usually made electronically through RENTAS. Payments through RENTAS are final and cleared with immediate value and availability.
Payments of less than MYR 50,000 are usually made by cheque or cashier’s order. Checks and cashier’s orders deposited before 16:00 take two business days to clear.
However, specifically for trade settlement purposes, arrangements have been made by a number of counter-parties primarily between custodian banks, for trade related payments, to be effected via RENTAS, even though the amount is less than MYR 50,000.00.
Cheque clearing system: SPICK (National Automated Cheque Clearing System)
SPICK structures the entire country’s cheque clearing into six regions and requires Banks to set up automated systems, using imaging technology to process Clearing items.
Foreign investors are not permitted to go overdrawn. Overdraft facilities for other foreign institutions are still prohibited under current regulations.
The central bank, Bank Negara Malaysia has given permission for licensed onshore commercial banks to grant overdraft facilities to a foreign stockbroking company or custodian bank only, in aggregate of it not exceeding MYR 200 million for intra-day and not exceeding MYR 200 million for overnight. However, the permission is subject to the following conditions:
1. The credit facility is strictly for financing funding gaps due to inadvertent technical delays in payment for purchase of securities on the Bursa Malaysia Securities Berhad
2. The tenure of each overnight overdraft is limited to two working days, after which the facility has to be repaid.
3. The lending institution (i.e. the commercial bank) provides Bank Negara Malaysia, on a monthly basis, with a list of the foreign stockbroking companies/custodian bank which are granted such facilities
Please note that the above is only applicable to foreign stockbroking companies and custodian banks.