Bursa Malaysia Berhad (Bursa Malaysia) recently enhanced its Islamic Securities Selling and Buying – Negotiated Transaction (“ISSBNT”) Framework. ISSBNT is the world’s first Shariah-compliant alternative to Securities Borrowing and Lending, which the Exchange launched in December 2017.
It involves the sale and purchase of Shariah-compliant securities, which delivers the equivalent outcome of a conventional securities borrowing and lending transaction, but is structured according to Shariah principles.
The enhancement includes an “Additional Remedial Option” which allows users to recall or acquire back the securities if the status of the ISSBNT Eligible Securities changes to Shariah non-compliant, while the previous framework only allowed transactions to be cash settled via commodity murabahah or replacement with similar Shariah-compliant securities as remedial options.
The “Additional Remedial Option” entails instituting a seven (7) Market Days grace period to facilitate and provide an ideal window and sufficient time for securities transfers and transactions to take place, after taking into account the T+2 clearing and settlement cycle.
However, in order for this option to apply, the exercise must be completed within seven (7) Market Days from the effective date of the updated List of Shariah-compliant Securities by the Shariah Advisory Council of the Securities Commission Malaysia.
“The enhanced ISSBNT model was developed in response to industry’s demands to meet the need of today’s dynamic investment and market landscape,” said Datuk Muhamad Umar Swift, CEO of Bursa Malaysia.
“The additional settlement option will provide a more facilitative trading environment to enable market participants greater flexibility to buy and sell the Shariah-compliant securities under the ISSBNT model which will improve trading liquidity and velocity of Shariah-compliant securities assets.”
To date, the Securities Commission Malaysia’s Shariah Advisory Council has reviewed and approved 163 Shariah-compliant securities eligible for ISSBNT transactions. Last year, the Exchange on-boarded three (3) Approved Supplier and User Representatives under the ISSBNT Framework, namely CGS-CIMB Securities Sdn Bhd, Kenanga Investment Bank Berhad, and Maybank Investment Bank.
This brings the total number of Approved Supplier and User Representatives to four (4), including Affin Hwang Investment Bank Berhad, who came on board in 2018.
The FAQs on the updated ISSBNT Framework is available on Bursa Malaysia’s website at: https://www.bursamalaysia.com/reference/faqs/islamic_market/faqs_on_issbnt
To learn more about ISSBNT in general, please visit: https://www.bursamalaysia.com/trade/post_trade/issbnt/operational_framework
On a separate development, Bursa Malaysia also enhanced its Central Matching Facility (“CMF”) System in January 2023 to augment the Exchange’s end-to-end Shariah-compliant securities trading platform, Bursa Malaysia-i. The CMF System enhancement enables Clearing Participants to conduct Institutional Settlement Service transactions through Shariah settlement, which is hoped to further strengthen the Shariah investing ecosystem.