Bursa Malaysia

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Investor Protection

Bursa Malaysia Derivatives Berhad (BMD) is a subsidiary of Bursa Malaysia Berhad established in 1993. BMD provides, operates and maintains equity, interest rates, bond, agricultural commodity (crude palm oil and palm kernel), metal commodities (gold and tin) futures and options market trading and settlement services. BMD products are available on the CME Globex electronic trading platform for greater distribution of the Malaysian derivatives offerings to the global market.

Financial Audit of Clearing Participants

Financial Audit of Clearing Participants

Financial Audit & Compliance Programme

Bursa Malaysia Derivatives Clearing monitors the financial position of its members through:

  • Financial reporting

    General Clearing Members are required to submit an ANC statement (prepared according to the business rules), balance sheet, an income/loss statement and a statement of clients' segregated funds on a monthly basis.

    Direct Clearing Members are required to submit an NTA statement on a monthly basis and their annual audited accounts to Bursa Malaysia Derivatives Clearing.

  • Audits

    Bursa Malaysia Derivatives Clearing conducts routine and surprise audits of the member's financial statements and reviews their compliance with the business rules and internal controls. The audit team also reviews the member's risk management policies and procedures.

  • Information-sharing

    The Exchange conducts audits on its members to ensure compliance with the Exchange's business rules and the results of these audits are shared with Bursa Malaysia Derivatives Clearing, where it concerns a Clearing Member.

    In addition the Exchange is obliged under the clearing agreement with Bursa Malaysia Derivatives Clearing to inform it of the general conduct and trading activities of members particularly if the member faces any financial difficulty.

  • Intra-day monitoring

    The members' positions during the trading day are constantly monitored. This enables Bursa Malaysia Derivatives Clearing to assess the impact of price movements and economic events on the adequacy of the members' margins and capital base.

Disciplinary and Default Actions

The risk management tools of Bursa Malaysia Derivatives Clearing, insofar as they relate to the rights and the obligations of the Clearing Members vis-a-vis the Clearing House, are implemented through its business rules. Therefore, a member default means both a failure to perform the obligations under an open contract as well as obligations under the Bursa Malaysia Derivatives Clearing business rules. Disciplinary and default actions perform the dual role of:

  1. discouraging member defaults in performing contractual and membership obligations.
  2. ensuring that a member default does not adversely affect the entire clearing membership and the market.

Bursa Malaysia Derivatives Clearing can:

  1. impose a fine of up to RM1 million on a member
  2. require additional funds to be deposited in the case of a default other than a default in payment obligations
  3. suspend or terminate a clearing membership
  4. liquidate or transfer open contracts of a defaulting member
  5. utilise any cash or collateral of the defaulting Clearing Member to cover its obligations
  6. utilise the security deposit and clearing fund

In the event of an emergency, where there is a threat to the financial integrity of Bursa Malaysia Derivatives Clearing or its clearing members, Bursa Malaysia Derivatives Clearing can take special actions such as refusing to register market contracts or placing conditions on their registration, obtaining emergency settlement prices from the Exchange, liquidating contracts and obtaining additional cash or collateral from Clearing Members.