Bursa Malaysia opens up short selling to 'wider' group of investors

April 16, 2018 | By | Reply More

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PETALING JAYA: Bursa Malaysia Bhd has opened up regulated short selling to a wider group of investors, it said, by implementing “a clear” framework to facilitate intraday short selling as part of its strategy to boost market liquidity.

With that, investors will be able to sell securities prior to acquiring them, within the trading day itself.

Regulated short selling of shares has been made available for quite some time, but participation has been largely restricted for retail investors.

In fact, restricted short selling and securities borrowing and lending were first introduced in 1996 but suspended barely a year later, following a meltdown in the stock market during the 1997 Asian financial crisis. The trading instrument was reintroduced in January 2007.

According to Bursa Malaysia, intraday short selling can be carried out on a selected list of eligible securities or approved securities. It comprises 280 securities and will be reviewed every six months.

“Introducing intraday short selling to a wider group of investors is timely considering the growing sophistication of market participants. This measure is part of the exchange’s strategy to boost market liquidity and further improves flexibility for market participants to refine their trading and risk management strategies,” said Bursa Malaysia CEO Datuk Seri Tajuddin Atan.

Bursa Malaysia statistics show that between six million and 14 million shares were short sold last week under the regulated short-selling framework.

A robust compliance requirement and safeguards have been put in place, with suspensions to intraday short selling to be triggered if a stock price falls by more than 15% from the previous day’s closing price or if the gross short-selling volume exceeds the daily maximum limit of 3% of outstanding shares per security.

The framework also specifies compliance obligation requirements for investors before short-selling activities can commence.

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