BNM issues exposure draft on framework for electronic trading platforms
30 July 2019
On 14 June 2019, Bank Negara Malaysia (“BNM”) issued an Exposure Draft on requirements and expectations on market participants who offer services of electronic trading platforms within the Malaysian wholesale financial markets, specifically money and foreign exchange markets. The consultation period closed on 15 July 2019.
BNM notes that, in recent years, the use of technology within the wholesale financial markets space has increased in prominence. The proliferation of operators of automated systems of electronic trading platforms significantly underscores the importance of instituting risk management processes, given that the various dimensions of risk often occur on an ex-post basis, rendering the integrity of the service provider to be of utmost priority.
Electronic trading platforms covered under this Exposure Draft include multi-bank channels, and excludes single-bank platforms. Specifically, covered entities include:
- approved money brokers which operate electronic broking platforms; and
- other market participants which operate electronic trading platforms, whether or not any form of remuneration, fee, commission or subscription is chargeable.
The Exposure Draft states that it is critical that only operators of electronic trading platforms which have adequate operational and governance capacity are allowed to offer their services to Malaysian onshore market participants. Based on the Code of Conduct for Malaysia Wholesale Financial Markets, market participants in the money and foreign exchange markets are allowed to offer such services only upon being duly approved by BNM.
The Exposure Draft sets out the approval requirements on platform operators to be eligible to provide their services on electronic trading platforms in the wholesale financial markets in Malaysia and the internal control requirements applicable on approved platform operators to safeguard the system integrity and data confidentiality of such platforms. In addition, it imposes requirements on approved platform operators to put in place or maintain appropriate internal governance, policies and procedures in providing their services.