The Securities Commission (SC) made enhancements to the structured warrants (SW) framework in 2022 to facilitate a greater variety of structured warrant issuances to meet investors’ risk profiles.

This would also further augment the attractiveness of the Malaysian SW market, the market regulator said in its Annual Report 2022 released yesterday.

“Since its introduction more than a decade ago, SW have been a popular trading instrument among retail investors and are generally issued based on equity and equity-based indices to investors from a current pool of seven issuers in the market,” it said.

Among other things, the enhancements to the framework involve expanding the underlying assets to include commodities, leveraging Malaysia’s strength as a commodity-producing country.

The market capitalisation criteria for shares listed on Bursa Malaysia was also revised downward to RM500 million, while no market capitalisation criterion will apply to listed exchange-traded funds (ETFs).

Additionally, the minimum tenure for index warrants has been shortened from the current six months to three months.

“To further improve market efficiency and liquidity, obligations imposed on market makers were also tightened.

“These market makers are required to be present in the market for at least 80 per cent of the trading hours, provide a narrower price spread of 10 bids and maintain the continuous bid-ask offer at a higher volume of at least 5,000 units of SW,” the SC said.

It said relevant rules in Bursa Malaysia Securities were also amended to facilitate the tightening of market makers’ obligations, effective January 2022.

“As for commodity-based SW, the SC is working towards getting a prescription order to facilitate the introduction of commodity-based SW in the market,” it said.

The SC also revised the Prospectus Guidelines on the offering of SW in June 2022 to facilitate clear, balanced, fair and full disclosures to investors.

Key amendments include the requirement to disclose the fees and charges involved and potential tax implications when investors exercise their SW as well as disclosure of the relationship between the issuer and the guarantor, where there is a performance guarantee.

“The revisions are also aimed at increasing the functionality and ease of navigation in prospectuses for investors and minimising the usage of technical and legal jargon to ease investors’ comprehension and understanding,” it said.

Meanwhile, on Sept 28, 2022, the SC granted Bursa Malaysia Derivatives (BMD) approvalin-principle (AIP) for the introduction of the FTSE4Good Bursa Malaysia Index Futures (F4GM) contract.

This is in line with the clear shift to environmental, social and corporate governance (ESG) investments globally and the growing acceptance of such investments in Malaysia.

“Launched in December 2022, the F4GM contract is aligned with the nation’s sustainability agenda and complements current initiatives such as the implementation of Malaysian Sustainable Palm Oil (MSPO) Certified Physical Delivery for palm oil on the exchange and the launch of Bursa Malaysia’s voluntary carbon market in the same month,” it added. — Bernama