KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
A new study by Coalition Greenwich reveals that over 70% of market participants anticipate higher trading costs for US Treasuries due to new margin requirements and clearing fees associated with mandatory central clearing. While these changes aim to make the market safer and reduce systemic risk, they are likely to come at the expense of increased costs and potentially reduced trading volumes.
Key Findings:
Increased Costs and Reduced Activity: The study, which surveyed 34 market participants including four of the top five Treasury dealers by revenue, found that around 85% of respondents believe that rising margin costs could lead to reduced trading activity. The new Securities and Exchange Commission (SEC) rules require most cash Treasuries and repurchase agreements to use central clearing by the end of 2025 and mid-2026, respectively.
Market Safety vs. Cost Concerns: Despite the expected rise in trading costs, the majority of respondents agree that mandatory clearing will enhance market safety and resilience by reducing systemic and contagion risks. Central clearing is designed to minimize the danger of a financial contagion by ensuring that the clearing house, rather than individual counterparties, assumes responsibility for completing transactions.
Impact on Different Market Players: The study suggests that the new rules may not affect all market participants equally. Dealers and trading venues could benefit from the changes, while hedge funds and non-bank liquidity providers may face negative impacts, potentially altering the competitive landscape in the Treasury market.
The new SEC rules reflect a broader regulatory push to channel trades through clearing houses, ultimately aiming to bolster market stability. However, the increased costs associated with these changes could reshape trading behavior and market dynamics in the coming years.
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