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SECURITIES BORROWING AND LENDING: THE BLOCKCHAIN PATH TO BUILDING OPERATIONAL EFFICIENCIES

01 Nov 2019

Kuala Lumpur, 1 November 2019 – Bursa Malaysia Berhad (“Bursa Malaysia” or “the Exchange”) has completed its first securities borrowing and lending (“SBL”) Proof-Of-Concept (“POC 1”) blockchain technology solution designed to increase the efficiency, speed and capacity in the securities lending supply and borrowing demand (“Lending Pool”).

SBL POC 1 was executed and tested with technology partner Forms Syntron Information (HK) Ltd (“FORMS HK”), a subsidiary of Shenzhen Stock Exchange-listed Shenzhen Forms Syntron Information Co. Ltd., and industry collaborators Affin Hwang Investment Bank Berhad, CGS-CIMB Securities Sdn Bhd, Citibank Berhad, Kumpulan Wang Persaraan (Diperbadankan) and Malacca Securities Sdn Bhd.

A first of its kind in the ASEAN, SBL POC 1 was executed using an agile methodology comprising robust design thinking, development and testing stages. SBL POC 1 was a successful test of a private-permissioned blockchain-driven SBL Lending Pool that can enhance market discovery, create increased efficiencies as well as build transparency and trust. It has secure, shared ledgers and smart contracts which enable instant and automated update of asset status. Information stored in the ledger, like records of trade negotiations and order confirmations, are immutable, auditable and traceable. It avoids the need for manual reconciliation, which may introduce errors due to disparate methods of trade negotiation and order confirmation recording.

Bursa Malaysia Chief Executive Officer, Datuk Muhamad Umar Swift said, “Evidence shows that a vibrant SBL market is one of the key characteristics of a developed capital market. As such, it is imperative that we tackle the operational challenges of today with a technologically driven solution that is flexible and scalable into the future. The proof-of-concept also brings in new knowledge, insights and practical experience in harnessing digital innovation - a core requirement of any exchange that aims to be a leader in its space in the future.”

SBL POC 1 is the kickoff to a longer-term holistic roadmap that leverages emerging technology to address challenges in the SBL market. POC 1 targets the SBL Lending Pool, the fundamental building block of this roadmap, and sets up the future possibility of developing and testing a blockchain solution that can transform the execution, collateral management and corporate action management areas of Malaysia’s SBL market.

In line with our promise to Create Opportunities and Grow Value, Bursa Malaysia welcomes greater industry collaboration and partnerships for future POCs with the aim of building a future-ready end-to-end SBL technology-driven solution in aid of our progress towards a developed market.

To be an industry collaborator or partner, please email us at innovation@bursamalaysia.com to register your interest and gain access to the industry report.