BNM objection to SGX launch of ringgit futures meant for Malaysians

BNM Governor Datuk Muhammad Ibrahim had on Friday cautioned Malaysians that offshore trading of the ringgit was not allowed.

KUALA LUMPUR: Bank Negara Malaysia's (BNM) recent statement objecting to Singapore Stock Exchange's (SGX) move to introduce the trading of ringgit futures was meant for Malaysians.

BNM Governor Datuk Muhammad Ibrahim had on Friday cautioned Malaysians that offshore trading of the ringgit was not allowed.

"We'll certainly take action," he said, adding that foreign banks licensed in Malaysia who helped Malaysians facilitate such transactions would also be taken to task.

"It's important to note that this is not a new policy or regulation," Muhammad added.

On Aug 9, BNM issued a statement, hitting out at SGX and the Intercontinental Exchange (ICE) in Singapore after the bourses introduced the trading of ringgit futures on their exchanges that went against the country’s policies.

Saying the introduction of the derivative contracts was inconsistent with Malaysia’s foreign exchange administration (FEA) policy and rules, the central bank reminded all market participants to observe existing FEA rules.

“Contravention of the FEA is an offence under the Financial Services Act 2013 and Islamic Financial Services Act 2013,” it said in a statement .

“Appropriate action under the law will be taken against any person that does not comply with prevailing rules and regulations.

“Foreign participants should access the onshore ringgit foreign-exchange market to meet their financial needs, either directly with onshore licenced financial institutions or their appointed overseas office.”

The ringgit is a non-internationalised currency, and thus, BNM said the offshore trading of the ringgit in any form, whether as a non-deliverable forward (NDF) traded out of offshore financial centres or as a futures, options and other derivative contracts on exchanges outside of Malaysia, is against Malaysia’s policy. 

BNM has taken great effort to restrict the trading of the ringgit offshore. It decided to act in December last year against the offshore NDF market after seeing how the onshore rates were taking their cue from abroad on what the ringgit’s value against the US dollar should be.