KUALA LUMPUR (June 15): Bank Negara Malaysia (BNM) said a new spot fixing methodology for US dollar/ringgit trade, based on market transaction data, will be implemented from July 18.

In a statement today, BNM said that under the new methodology adopted by the central bank and the Financial Markets Association of Malaysia (FMA), the reference rate will be known as the Kuala Lumpur USD/MYR Reference Rate.

The move is part of the effort to adopt global best practices for the domestic financial market, BNM said, adding that another measure involves the expansion of the official closing hour for onshore ringgit market from to 6pm from 5pm.

The additional hour will give businesses more time to complete their foreign exchange transactions, it said, adding that onshore market participants may continue to transact after the official closing hour.

BNM said the Kuala Lumpur USD/MYR Reference Rate will be published daily at 3.30pm and is computed based on weighted average volume of the interbank USD/MYR FX spot rate transacted by the domestic financial institutions between 8am and 3pm.

The market transaction data is sourced from online reporting by domestic financial institutions to BNM, it added.

"The new methodology is more transparent and better reflects underlying trades during the day," BNM said.

The Kuala Lumpur USD/MYR Reference Rate will be published under a parallel trial on Reuters page KLMYRREF starting from June 20 and will be effective only from July 18. This parallel period allows for the market transition process.

On the effective date, the Kuala Lumpur USD/MYR Reference Rate will assume the current PPKM-MYR page on MYRFIX02 and continue thereafter. BNM and FMA expect a smooth migration without any disruptions.

The same reference rate shall be made available on Bloomberg and any other platform on timely basis for widest possible coverage. In case of inconsistencies, reference rate as published on Reuters page MYRFIX02 shall be official, said BNM.

"These enhancements in the Malaysian financial market infrastructure follow from the ongoing collaboration with the FMA, and are among the first few initiatives discussed at the Financial Market Committee, an inclusive forum for all financial market stakeholders to further develop and improve the Malaysian financial markets," said BNM director of investment operations and financial market Adnan Zaylani.

"The Kuala Lumpur USD/MYR Reference Rate, which is based on market transaction data rather than submission of quotations by selected banks in the previous methodology, represents comprehensively all interbank FX transactions conducted during the trading period.

"This initiative elevates the USD/MYR FX benchmark rate setting process to global best practices, ensuring that the FX spot reference rate is well received domestically and internationally, contributing to the further development of the Malaysian financial markets," added FMA president Lee K Kwan.