The Securities Commission Malaysia has revised its guidelines for exchange-traded funds (ETFs), allowing for the issuance of a more diverse range of them onto the market. These include futures-based ETFs, synthetic ETFs, physical commodity ETFs and smart beta ETFs.

This introduction of a fresh array of ETFs is aimed at promoting competitive growth and 'product innovation' while presenting HNW investors with riskier but (in the eyes of the more adventurous among them) more interesting products.

The regulator expects the Asian ETF market to be growing in assets at a rate of 18% per annum by 2021. Malaysia has ten listed ETFs with a combined market capitalisation of about 2.03 billion ringgit (US$483 million).

It is hoped that futures-based ETFs, such as Leveraged and Inverse (L&I) ETFs, will pave the way for a more cost-effective channel through which investors can access the traditionally sophisticated futures market.

Due to the complexity of the L&I ETFs, prospective retail investors must do certain things before they can invest in these products. For one thing, they must undergo an e-learning module developed by Bursa Malaysia (the exchange) as well as a performance simulator provided by the management companies of L&I ETFs.

Full compliance with the new guidelines must occur by 2 January. A regulatory 'FAQ' document that deals with transitional arrangements says: "Applications to the SC can still be made based on the existing guidelines up to 31 December 2018. However, applicants are encouraged to comply with the requirements under the guidelines on ETF for applications made prior to the effective date. From the effective date onwards, all applications must be made based on the guidelines on ETF. For a deed or prospectus that needs to be amended to comply with the guidelines on ETF, the applicant should consult the SC on the timeframe for the registration of a supplementary deed or prospectus."