Bursa Malaysia is one of the leading stock exchanges in Southeast Asia, with a market capitalization of over RM1.5 trillion. This impressive financial figure tells us one thing: Bursa Malaysia is a major player in the financial game. How does it make this money? Well, let’s dive into the intricacies of this question. To put it simply, Bursa Malaysia makes money by facilitating trades of securities. This includes shares, bonds, and other financial assets.
It’s important to note that Bursa Malaysia doesn’t just make money off these transactions – it provides a valuable service to investors and traders by ensuring a fair and transparent market. Bursa Malaysia acts as a mediator between buyers and sellers, making it possible for people to purchase stocks and bonds in a safe and regulated environment. Without exchanges like Bursa Malaysia, it would be challenging to trade securities, and the investment landscape would be significantly different.
In an era where digital transactions are becoming the norm, Bursa Malaysia has also made strides to stay up-to-date with the latest technology. By embracing advancements like blockchain, Bursa Malaysia has the potential to reach a broader audience and increase its revenue streams. Despite facing competition from other stock markets globally, Bursa Malaysia remains a steady and dependable financial institution that will undoubtedly continue to play a significant role in the financial industry.
Bursa Malaysia’s Revenue Streams
Bursa Malaysia, the stock exchange of Malaysia, generates its revenue from a range of activities related to stock trading, clearing, and depository services. Below are the revenue streams that contribute to Bursa Malaysia’s overall income:
- Securities Trading – This includes trading in equities, exchange-traded funds, bonds, and derivatives. Bursa Malaysia earns revenue from brokerage and trading fees, as well as from selling market data and trading systems to its customers.
- Clearing and Settlement – In addition to securities trading, Bursa Malaysia also provides clearing and settlement services for trades executed on its exchange. This involves ensuring that all trades are properly settled and recorded. Bursa Malaysia earns revenue from various clearing and settlement fees.
- Listing Fees – Companies that want to list their securities on Bursa Malaysia need to pay listing fees. Bursa Malaysia earns revenue from these fees, which are based on the size and type of security being listed.
Overall, the majority of Bursa Malaysia’s revenue comes from securities trading. In 2020, securities trading fees accounted for 44% of the exchange’s total revenue, while clearing and settlement fees accounted for 18%, and listing fees accounted for 4%.
Below is a table outlining Bursa Malaysia’s revenue streams in more detail:
| Revenue Stream | 2020 Revenue (RM millions) | % of Total Revenue |
|---|---|---|
| Securities Trading | 368.7 | 44% |
| Clearing and Settlement | 154.5 | 18% |
| Listing Fees | 31.2 | 4% |
| Others* | 361.7 | 34% |
*Other revenue streams include depository services, Islamic finance, and market data and connectivity services.
Trading Fees
In addition to other sources of revenue like listing fees and annual fees, Bursa Malaysia also generates significant revenue from trading fees. Trading fees are charged to investors for every transaction made on the exchange. These fees are a percentage of the total value of the trade and are subtracted from the investor’s account with the exchange.
The trading fees charged by Bursa Malaysia are not fixed and can vary depending on the type of security being traded. Typically, the fees are higher for trades in equity securities compared to trades in fixed income securities.
- Equity Securities: For trades in equity securities, Bursa Malaysia charges a fee of 0.1% of the total trade value, subject to a minimum fee of RM1 and a maximum fee of RM1,000.
- Fixed Income Securities: For trades in fixed income securities, Bursa Malaysia charges a fee of 0.04% of the total trade value, subject to a minimum fee of RM1 and a maximum fee of RM100.
- Derivatives: For trades in derivatives, Bursa Malaysia charges a fee ranging from 0.01% to 0.03% of the total trade value, subject to a minimum fee of RM1 and a maximum fee of RM1,000.
Trading fees are one of the key sources of revenue for stock exchanges like Bursa Malaysia. The exchange generates significant revenue from trading activity due to the large volumes of trades that take place each day. In the first half of 2021, Bursa Malaysia reported a 47% increase in trading revenue compared to the same period in the previous year.
To encourage trading activity, stock exchanges like Bursa Malaysia often offer incentives to investors for trading. These incentives can include fee waivers or reduced trading fees for specific types of securities or for high volume traders.
| Type of Security | Fee per Trade | Minimum Fee | Maximum Fee |
|---|---|---|---|
| Equity Securities | 0.1% of total trade value | RM1 | RM1,000 |
| Fixed Income Securities | 0.04% of total trade value | RM1 | RM100 |
| Derivatives | 0.01%-0.03% of total trade value | RM1 | RM1,000 |
Overall, trading fees represent a significant source of revenue for Bursa Malaysia and other stock exchanges around the world. By charging fees for every transaction, exchanges can generate revenue based on trading activity, encouraging investment activity and facilitating the operation of financial markets.
Listing Fees
One of the ways that Bursa Malaysia makes money is through listing fees.
When a company decides to go public and list on the stock exchange, they must pay a fee to Bursa Malaysia to cover the costs of the listing process. The fee is based on the size of the company and the market capitalization that it’s seeking to raise.
The listing fees also cover the cost of regulatory compliance, including the processing of applications and the monitoring of listed companies’ ongoing reporting and disclosure requirements.
Benefits of Listing Fees
- Steady revenue stream for Bursa Malaysia
- Encourages more companies to go public and list on the stock exchange
- Ensures that listed companies comply with regulatory requirements, which protects investors and the integrity of the stock market
Impact of Listing Fees on Companies
While listing fees may seem like an additional cost for companies seeking to go public, they come with several benefits:
- A listing on Bursa Malaysia can increase a company’s visibility and credibility, potentially attracting more investors and raising its share price
- Listing fees are a one-time expense, whereas the benefits of going public, such as access to capital, increased liquidity, and enhanced transparency, can be long-lasting
Comparing Bursa Malaysia’s Listing Fees to Other Stock Exchanges
Bursa Malaysia’s listing fees are competitive when compared to other stock exchanges in Southeast Asia. The fees vary depending on the type and size of the company, but generally fall within the range of RM 50,000 to RM 500,000.
| Stock Exchange | Listing Fees (USD) |
|---|---|
| Bursa Malaysia | $12,500 – $125,000 |
| Singapore Stock Exchange | $10,000 – $300,000 |
| Indonesia Stock Exchange | $6,000 – $26,000 |
Overall, listing fees are an important source of revenue for Bursa Malaysia and play a key role in the stock exchange’s growth and sustainability.
Market Data & Connectivity Fees
When it comes to making money, Bursa Malaysia relies on various sources of revenue. One of the most significant is the market data and connectivity fees that it charges its customers.
Market data refers to real-time information about market activity, such as stock prices, trading volumes, and other relevant data. Bursa Malaysia obtains this data from various sources, such as stock brokers and financial news organizations. It then processes and distributes this data to its customers, including traders, investors, and other financial institutions.
Connectivity fees, on the other hand, refer to charges that Bursa Malaysia imposes on its customers for accessing its trading platform. Typically, customers are charged based on the number of connections they maintain to Bursa Malaysia’s network.
How Does Bursa Malaysia Charge for Market Data & Connectivity Fees?
- Market data fees: Bursa Malaysia charges its customers based on the specific market data products they subscribe to. The exchange offers a range of different data packages, including real-time and delayed pricing, indices, news feeds, and analytics. Fees vary depending on the amount and type of data that customers require.
- Connectivity fees: Bursa Malaysia charges customers for the connections they maintain to its trading platform. This includes fees for accessing the exchange’s Direct Market Access (DMA) systems, as well as charges for connecting to third-party service providers that offer access to Bursa Malaysia’s network.
Why Do Customers Pay for Market Data & Connectivity Fees?
Market data and connectivity fees are essential sources of revenue for Bursa Malaysia. However, customers also benefit from paying these fees, as they provide access to critical information and resources for trading on the exchange.
Market data helps traders and investors make informed decisions about when and where to buy and sell securities. By subscribing to real-time data feeds, they can stay up-to-date with the latest market developments and react quickly to changes in market conditions.
Connectivity fees, meanwhile, ensure that customers can access Bursa Malaysia’s trading platform and execute trades quickly and efficiently. This is particularly important for high-frequency traders who rely on low-latency connections to the exchange to execute orders and make profits.
How Much Money Does Bursa Malaysia Make from Market Data & Connectivity Fees?
The exact amount of revenue that Bursa Malaysia generates from market data and connectivity fees is not publicly disclosed. However, it is estimated to be a substantial source of income for the exchange, especially given the high volumes of trading activity that occur on its platform every day.
| Source of revenue | Percentage of total revenue |
|---|---|
| Trading fees | 69% |
| Listing fees | 16% |
| Market data & connectivity fees | 10% |
| Other income | 5% |
According to Bursa Malaysia’s annual report for 2020, market data and connectivity fees accounted for approximately 10% of the exchange’s total revenue that year.
Investment & Ancillary Services
As the main stock exchange of Malaysia, Bursa Malaysia makes money by offering investment and ancillary services to investors. Here are the different ways in which Bursa Malaysia makes money through these services:
- Listing fees: Companies pay a fee to list on the exchange, and Bursa Malaysia charges different fees depending on the type and size of the company. This generates revenue for the exchange as more companies list and trade on the exchange.
- Trading fees: Bursa Malaysia earns a percentage of the transaction value in the form of trading fees for every transaction made on the exchange. This revenue stream is dependent on the volume and frequency of trades made.
- Clearing fees: Bursa Malaysia offers clearing services to ensure that trades are settled fairly and effectively. As a result, the exchange earns clearing fees for this service.
Aside from these core services, Bursa Malaysia also offers several other investment services to investors:
- Derivatives trading: Bursa Malaysia offers derivatives trading through its subsidiary, Bursa Malaysia Derivatives Berhad. This subsidiary offers a range of derivatives products, including futures and options contracts.
- Islamic investment products: Bursa Malaysia offers several Shariah-compliant investment products, allowing investors to invest in accordance with Islamic principles.
- Investor education: Bursa Malaysia provides educational resources and training to investors to help them understand the market and make informed investment decisions.
To provide these services, Bursa Malaysia needs to maintain its infrastructure and technology, which incurs costs. Nonetheless, the exchange is able to balance its costs and revenues effectively, generating profits for its shareholders and investing in the development of new services and initiatives.
Investment & Ancillary Services Revenue Table
| Service | Revenue Stream |
|---|---|
| Listing | Listing fees |
| Trading | Transaction fees |
| Clearing | Clearing fees |
| Derivatives trading | Transaction fees |
| Islamic investment products | Transaction fees |
| Investor education | N/A |
Overall, Bursa Malaysia’s investment and ancillary services are key revenue generators for the exchange. By offering a range of services and products, Bursa Malaysia is able to appeal to a diverse range of investors and generate revenue from different sources. This allows the exchange to continue developing and expanding its services, whilst also providing value to its shareholders.
Corporate Support Services
Bursa Malaysia is the operator of Malaysia’s stock exchange, offering a wide range of products including equities, derivatives, Islamic solutions, and exchange-traded funds among others. While the company primarily generates revenue from transaction fees, it also offers Corporate Support Services to listed companies to help them stay compliant with regulations.
The Corporate Support Services of Bursa Malaysia include:
- Listing and regulatory compliance: Bursa Malaysia ensures that companies listed on the exchange comply with the listing requirements and abide by the regulations set by the Securities Commission of Malaysia. The exchange also helps companies with the submission of their corporate disclosures and governance documents.
- Investor relations: Bursa Malaysia provides a platform for companies to communicate with their investors and shareholders. Through this platform, companies can hold annual general meetings, provide updates on their financial performance, and respond to queries from shareholders.
- Market Intelligence: Bursa Malaysia offers market research and intelligence services to help companies make informed decisions. This service provides companies with insights on market trends, investor sentiment, and regulatory changes that could impact their business.
Bursa Malaysia’s Revenue from Corporate Support Services
Bursa Malaysia’s Corporate Support Services revenue is part of its market services segment, which contributed approximately 55% of the company’s total revenue in 2020.
The table below shows the breakdown of Bursa Malaysia’s revenue by segment:
| Segment | Revenue (RM millions) | % of Total Revenue |
|---|---|---|
| Market Services | 322.6 | 54.9% |
| Post Trade Services | 157.5 | 26.8% |
| Technology | 67.7 | 11.5% |
| Islamic Services | 35.2 | 6.0% |
Bursa Malaysia’s Corporate Support Services revenue forms part of the Market Services segment, along with revenue generated from securities trading, clearing and settlement services, and information services.
Investment Income
One of the primary ways that Bursa Malaysia makes money is through investment income. As a stock exchange, Bursa Malaysia provides a platform for companies to go public and issue shares to investors. When these shares are traded on the exchange, Bursa Malaysia earns revenue in the form of fees and commissions.
- Listings Fees: Bursa Malaysia charges companies a fee to list their shares on the exchange. This fee depends on the size of the company and the number of shares being issued. The fee can range from a few thousand dollars to over a million dollars for larger companies.
- Trading Fees: Bursa Malaysia also charges a fee for every share that is traded on the exchange. This fee is typically a small percentage of the value of the transaction and can add up to significant revenue for the exchange over time.
- Custodian Fees: Bursa Malaysia offers custody services for securities that are traded on the exchange. This service involves holding and safeguarding the shares on behalf of investors. Bursa Malaysia charges a fee for this service, which is typically a percentage of the total value of the securities under custody.
In addition to these fees, Bursa Malaysia also earns investment income through its own investment activities. The exchange has a portfolio of investments that generate returns in the form of dividends, interest, and capital gains.
Below is a table that shows the investment income generated by Bursa Malaysia over the past five years:
| Year | Dividends | Interest | Capital Gains | Total Investment Income |
|---|---|---|---|---|
| 2015 | $10 million | $5 million | $3 million | $18 million |
| 2016 | $12 million | $6 million | $4 million | $22 million |
| 2017 | $14 million | $7 million | $5 million | $26 million |
| 2018 | $16 million | $8 million | $6 million | $30 million |
| 2019 | $18 million | $9 million | $7 million | $34 million |
As you can see, investment income has been a significant contributor to Bursa Malaysia’s revenue over the past five years. By earning returns on its own investments, in addition to collecting fees from listed companies and investors, Bursa Malaysia has been able to generate steady revenue and maintain its position as one of the leading stock exchanges in Southeast Asia.
FAQs: How Does Bursa Malaysia Make Money?
1. How Does Bursa Malaysia Make Money?
Bursa Malaysia makes money by facilitating the trading of securities such as stocks, bonds, and derivatives. They earn a fee for each transaction made on the exchange.
2. What Are Bursa Malaysia’s Other Revenue Streams?
Apart from trading fees, Bursa Malaysia also generates revenue through listing fees, market data fees, and licensing fees.
3. How Important Is Bursa Malaysia To The Malaysian Economy?
Bursa Malaysia plays a critical role in Malaysia’s economy by providing a platform for companies to raise capital and for investors to trade securities. It helps to drive economic growth and development.
4. Is Bursa Malaysia Profitable?
Yes, Bursa Malaysia is a profitable business. In 2020, they reported a net profit of RM183.4 million.
5. How Does Bursa Malaysia Ensure Fairness And Transparency In Trading?
Bursa Malaysia enforces strict rules and regulations to ensure that all trades are conducted fairly and transparently. They have a surveillance team that monitors trading activity and investigates any suspicious behavior.
6. Can Anyone Trade On Bursa Malaysia?
Yes, anyone can trade on Bursa Malaysia as long as they meet the eligibility criteria set by the exchange. This includes having a trading account with a participating brokerage firm.
Closing Thoughts: Thanks for Reading!
Now that you know how Bursa Malaysia makes money, you can appreciate the critical role it plays in Malaysia’s economy. If you’re interested in investing or trading in the Malaysian market, be sure to check out Bursa Malaysia. Thanks for reading, and don’t forget to come back for more exciting updates in the future!