By designating selected shares as Approved Collateral to be lodged by Clearing Participants, this consequently enables clients to lodge these shares with Futures Brokers/Clearing Participants as margin collateral for derivatives trading. The client remains the beneficial owner of these shares, thus allowing him/her to continue to derive all economic benefits of share ownership of these pledged shares.
If the investor wishes to liquidate part of the equity portfolio that has been pledged as margin collateral for any reason, such as re-balancing of portfolio, to realise a favourable share price, or for adjustment of hedging strategy; part or all of the initial margin payment may be replaced with cash, bank guarantees or letters of credit. Foreign clients can also lodge selected foreign currencies.
Shares lodged with Bursa Malaysia Derivatives Clearing Bhd will be revalued at the end of each business day according to the closing price of the shares. The value of the shares will be subjected to a haircut to manage the risk that may arise from the widening of bid-ask spreads of the shares.
Encik Ridzal Sheriff, Head Group Business Development of Bursa Malaysia explained that this facility would further widen the breadth of non-cash collateral that can be used for derivatives trading and would complement the investment objectives and strategies of various investors by allowing investors to deposit a mixture of liquid or non-liquid assets as initial margin payments.
Initially, 25 blue chip shares will be accepted based on selection criteria that include liquidity and price stability of the shares. The list of eligible shares will be reviewed by the clearing house on a quarterly basis. As of 28 January 2005, the list of eligible shares is as follows:
AMMB Holdings Bhd | Maxis Communications Bhd |
Berjaya Sports Toto Bhd | PLUS Expressways Bhd |
British American Tobacco Malaysia Bhd | Proton Holdings Bhd |
Commerce Asset Holdings Bhd | Public Bank Bhd |
Genting Bhd | Sime Darby Bhd |
Hong Leong Bank Bhd | SP Setia Bhd |
IJM Corp Bhd | Star Publications Malaysia Bhd |
IOI Corp Bhd | Tanjong Plc |
Kuala Lumpur Kepong Bhd | Telekom Malaysia Bhd |
Malakoff Bhd | Tenaga Nasional Bhd |
Malayan Banking Bhd | UMW Holdings Bhd |
Malaysia International Shipping Corp Bhd | YTL Corp Bhd |
Malaysian Pacific Industries Bhd |
This view was shared by Mr Laren Tan, Executive Director of TA Futures who said that this facility would hopefully prove to be a powerful catalyst to bridging the equity and futures market participants, and attract greater participation in the futures market.
As a guide to this new facility please find attached a list of Frequently Asked Questions.