SC announces margin financing flexibilities for capital market participants

The SC said effective tomorrow, brokers may, at their discretion, not make margin calls or impose haircuts on any collateral and securities purchased and carried in margin accounts. — Picture by Firdaus Latif
The SC said effective tomorrow, brokers may, at their discretion, not make margin calls or impose haircuts on any collateral and securities purchased and carried in margin accounts. — Picture by Firdaus Latif

KUALA LUMPUR, March 26 — The Securities Commission Malaysia (SC) has approved additional measures by Bursa Malaysia Bhd to assist market participants in the current volatile and challenging market environment.

In a statement today, the SC said effective tomorrow, brokers may, at their discretion, not make margin calls or impose haircuts on any collateral and securities purchased and carried in margin accounts.

They are also empowered to exercise their discretion on whether to impose force-selling measures on clients.

Previously, brokers were required to automatically liquidate clients’ margin accounts if the equity in those accounts falls below 130 per cent of the outstanding balance.

The SC has also approved a broader list of accepted collaterals for margin financing.

With this flexibility, brokers can now accept other collaterals, such as bonds, unit trusts, gold and immovable properties to maintain their clients’ margin accounts, and value these collaterals accordingly, it said.

All the above, effective March 27 until September 30 2020, are subject to brokers meeting their own capital adequacy ratio and shareholder funds as required by Bursa Malaysia.

They are also expected to exercise discretion in accordance with their own credit risk policies.

“This move will help brokers continue focusing on their business and assist their clients during this period of unprecedented volatility and uncertainty resulting from the broader market impact of Covid-19,” SC chairman Datuk Syed Zaid Albar said.

In the quest to facilitate compliance with the movement control order (MCO), the SC said brokers, trading participants, clearing participants and authorised depository agents are encouraged to operate shorter counter service hours for their clients.

Further details on these additional measures will be announced by Bursa Malaysia.

The SC has also confirmed that the capital market would continue to operate as usual, within normal trading hours, during the extended period of the MCO until April 14, 2020.

All licensed and registered capital market participants are expected to remain open and operating in line with the MCO objectives to curb the spread of Covid-19.

The SC has been proactively monitoring the national and global development of the pandemic to assess its impact and will continue to evaluate and calibrate the scale of its responses in order to maintain market integrity. — Bernama

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