Both local and foreign players participating in RFP, deadline now August
Idea is to help local companies raise funds, and for investors to cash out
[Updated with comments and a correction]
THE move to establish an alternative investment market in Malaysia along the lines of the OTC (Over-The-Counter) market at Nasdaq, is gathering steam with 61 parties collecting the RFP (request for proposal) from Malaysia’s Securities Commission.
The deadline for RFP submissions has also been extended from July 15 to Aug 5, sources said.
The Securities Commission (SC) gave a high-level briefing to over 100 interested parties in late May, where it presented a conceptual framework for Malaysia's first online platform to trade unlisted securities and alternative investment products, or the Malaysia Unlisted Market (MyULM). For a PDF copy of the presentation at the briefing, click here.
The SC is now asking industry players for proposals on how they think it should be run and the business models they would adopt. It is going to be a tough task however. "I wonder if they realise just how difficult it is to create such a platform and the right ecosystem around it," said an experienced industry player.
[Updated Info]: As it is, intellectual property specialist Pintas IP Group describes MyULM as an ambitious and comprehensive platform covering multiple asset classes like unlisted shares, new asset classes (such as IP assets), crowd funding, and so on.
A spokesman from Pintas told Digital News Asia (DNA) that it feels the scope of the RFP is too extensive for a single player to submit a single comprehensive proposal within the time frame given -- more so when this is to be a self-funded project.
"We suggest that it will be more practical if multiple licenses can be issued under MyULM to different operators in charge of different assets classes,” said the spokesman. [End Updated Info]
The SC itself envisions the inelegantly-named MyULM to be a one-stop gateway for capital raising and trading of securities of startup companies and small-to-medium sized entities. Indeed, the availability of a pool of suitable companies to take advantage of this new market was a key concern of SC officials, the sources said.
Wary of the fact that Singapore had launched a similar market as far back as 2006 called OTC Capital operated by Phillip Securities, which floundered mainly because there were not enough interested companies to get on the platform, SC officers spent time meeting various industry players before being convinced that there would be enough interest. [Correction made to reflect right date]
Still, chances are that MyULM will not just be for Malaysian companies. The domestic company focus of Singapore’s unlisted market was another reason cited for its tepid performance, the sources said.
Other lesssons from Singapore are that marketing and education activities are very important once the online platform has been established.
“They set up too early when neither the companies nor markets were ready, and did not invest enough in these two areas,” said an industry player in Kuala Lumpur.
“It is inevitable that most people will not understand what this unlisted market is all about and that is why the SC needs to invest in marketing and advertising to promote the benefits and to highlight its criteria for companies to be eligible, and what type of individuals can invest in this space,” the source added.
Raising capital for, and the trading of securities of, startups and SMEs are seen as an important market gap that needs to be plugged as the Malaysian Government is slowly withdrawing its grant schemes from the market.
The entry of an unlisted market is thus seen as a key market mechanism to allow companies to raise funds and for investors to cash out.
The disclosure barriers are lower too, with no prospectus needed. Instead, an ‘Information Memorandum’ of between 20 and 30 pages is deemed enough for a company seeking to get on MyULM.
With this however, comes greater risk, and the SC is wary of investors being taken for a ride. It is thus likely that a high bar will be set for eligible investors who are fairly sophisticated and can afford the risk.
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