Principal dealers were permitted to conduct regulated short selling of corporate bonds from 13 April.
The initiative follows a roundtable, hosted by the Central Bank of Malaysia’s financial markets committee, in which 30 delegates representing domestic and institutional financial entities discussed the health of the country's bond market.
Proposals were tabled for further expansion of the short selling framework to include bonds, as well as increasing participation in the repo, bond swap and interest rate swap markets.
“The further development of onshore hedging will complement the liquidity in the secondary market, particularly on the longer end of the yield curve,” the Central Bank of Malaysia said at the time.
Securities Commission Malaysia said this latest initiative is part of continuous efforts towards enhancing the liquidity of the secondary bond market while ensuring a comprehensive and facilitative infrastructure and regulatory framework.