DATUK Muhamad Umar Swift, CEO of Bursa Malaysia Bhd, has more than 25 years’ experience in the banking, insurance and financial services industry.

Armed with a Bachelor of Economics from Monash University, Clayton, Australia, Umar started his career with Price Waterhouse as a chartered accountant in January 1986.

From September 2006, he was managing director and CEO of MAA Group Bhd, an insurance outfit ultimately controlled by Tunku Datuk Yaacob Khyra. He joined Bursa Malaysia in February 2019.

Two years into his tenure as CEO of the stock exchange, Umar reflects on his journey so far and the road ahead. Here are excerpts of The Edge’s exclusive interview with him:

The Edge: 2020 turned out to be a great year for Bursa Malaysia despite the outbreak of the Covid-19 pandemic, as ample liquidity and the stay-home phenomenon contributed to the rally in equities everywhere. What do you make of that?

Datuk Muhamad Umar Swift: 2020 was a very challenging year. It was a year of two halves. There was a whole new investor base, which we have never seen before, (that) came back to the market. The FBM KLCI started at 1,600 in January last year, and then it just fell to 1,219 in March. That coincided with the Movement Control Order (MCO), and everyone was not sure what was going to happen. This time last year, businesses were suffering, people did not see the light at the end of the tunnel.

What was the turning point?

With the pandemic, so much has changed. My wife (Datuk Professor Dr Adeeba Kamarulzaman) is an infectious disease specialist at UM Specialist Centre. The healthcare experts have been trying different solutions, they were looking at the UK and Europe on what could work. Today, we know so much more about the disease.

We then realised that the world did not have enough rubber gloves, because suddenly, hygiene became very important. The glove companies did not have sufficient capacity. That was just a wonderful call to action. A whole new group of investors have been opening Central Depository System (CDS) accounts. It was a much younger group of investors that came to join us. They found that opening CDS accounts online and trading online are not difficult. They made some profits and they never left the market.

While retail investors have been returning to the local bourse in a big way, do you expect the interest to be maintained when rates go up or normalcy returns? How do you keep them interested?

What we want to see is a healthy market, where companies can raise capital efficiently. The key to achieving that is to make sure that the listed companies are exciting enough and people want to invest in them. We need to have different themes in the market. We need to have more interesting companies and more green companies with adequate free float, so that more retail and institutional investors could invest in [them].

Are you concerned the active retail participation might eventually lead to mob mania?

Again, we want a healthy market. We are looking at all the elements in the market. If we look at the trading volume and value in August last year, it was very different from what we are seeing now. Back then, we were seeing a lot of penny stocks trading, which was more speculative in nature. But today, the value-to-volume ratio is now moving closer to 70-80 sen. In comparison, the collective value-to-volume ratio between June and August 2020 was 55 sen. Overall, we want to see a healthy level of trading, not just exuberance. And we hope investors can make more informed decisions.

While higher retail participation and a vibrant market are great for Bursa, have they also made your job as the frontline regulator more difficult?

Work on laying strong regulatory foundations started many years ago. Today, we are mainly building on this foundation and remain single-minded in our focus on improving efficiency and efficacy to ensure the operation of a fair and orderly market. This includes heavily investing in market and trade surveillance technology. Perhaps the challenge that comes with the proliferation of retail investors in our market is for retail investors to grasp the concept of trading in a truly informed manner. Continuous and effective education and awareness are essential for informed investing. We want retail investors to derive value from trading or investing in the marketplace as this will ensure that they are here to stay.

Do you think that the temporary relief measures given to listed companies last year, for example, virtual AGMs and raising the limit on the general mandate for issue of new securities from 10% to 20% of the total number of issued shares, have been abused by certain companies? For example, some questions were ignored at AGMs and quite a number of placements were undertaken, leading to dilution for existing shareholders.

Despite the stock market rally last year, the fact remains that many companies still needed the support, so we gave them regulatory relief. I think the key thing is to allow companies to access capital, to raise funds quickly and efficiently, when they need them. Certain controls are in place to make sure that everyone could benefit, no one benefits over another, nobody is being forced to subscribe to anything, and things like that. For instance, when there is a private placement exercise, we would ask the company to whom its shares will be placed. Sometimes we give a waiver, sometimes we don’t.

A listed company was in the spotlight last year when it appointed a businessman with a colourful past as its chairman. How could it happen?

We can’t block the appointment. However, we have put a positive obligation on the nomination committee of this listed company to have certain characters on the board. Our objective is to create policies and allow companies to run themselves. We want them to behave. We provide guidance, listing requirements and listing rules. We want to live the governance, but not in a prescriptive way.

What are your concerns on the ongoing BursaBets issue? Can we expect any action or regulatory measures to address it?

Our primary and secondary concerns are possible market manipulation, in particular pump and dump, and provision of investment advice by unlicensed individuals. This is not the first time the regulators have come across such trading frenzy. During the glove and healthcare stocks rally last year, we had received many complaints from the investing public on having followed such “advice” and having ended up being trapped with losses. The regulators are analysing these leads.

Do you personally monitor these social media and investment chat rooms?

Yes, I do. But every now and then, when they found out who I was, I got kicked out of the chat rooms. Do you think you want to have the CEO of the stock exchange in your chat room? I don’t think so. Although I do have somebody else in the chat rooms, they still found out.

With digitalisation and mobile trading, where do you see remisiers in 10 years, or even five years?

There is a steady increase in self-directed trading through online trading platforms. At the end of 2020, 78% of retail trades were placed online, as compared to 22% offline through phone calls to their dealers and remisiers.

The role of remisiers is evolving. Remisiers themselves need to adjust and think about their business models. So, this leads to a question for participating organisations and stockbroking firms (to answer) as well — how do they serve their clients? Some stockbroking firms are remisier-based, some are not. If you look at Singapore, some of the broking firms are letting go of their remisiers.

What we will be introducing here is discretionary trading for remisiers. It will be a big change. It gives them the opportunity to provide investment advice, and share a portion of profits from the advice. It is completely changing the nature of the relationship (between remisiers and clients), because it is not just about trading, but also the quality of the advice you give. This will give remisiers a new revenue source. There are customers who want a high level of touch, and there are customers who just want to be left alone to trade. What we want to see is [that] all investors have appropriate levels of engagement.

As at Dec 31 last year, Malaysia had 1,684 salaried dealer’s representatives, and 4,481 commissioned dealer’s representatives or remisiers. They provide not only share execution, but also advice and personal service where a trading platform cannot.

So, you are optimistic that they are not a dying breed?

The remisier profession has survived constant change and upheaval over decades of stock market booms and busts as well as financial market consolidation and liberalisation. The remisier is a rare breed of professionals who can and will continue to survive and thrive with his entrepreneurial spirit.

Today, we are seeing remisiers adapting to the changing investment landscape. Many are inherently involved in multiple value-added roles before and after each share transaction. Many have acquired new skills and upgraded their knowledge to meet the changing demands of investors and moved beyond traditional stockbroking to selling listed and non-listed financial products such as equity-linked notes, yield-enhanced certificates, corporate bonds and other innovative derivative products to boost their incomes.

There were a few incidents of trading glitches on Bursa last year. What measures have been taken to prevent them from happening again?

We take the two trading incidents in December 2019 and July 2020 very seriously. We would like to reassure you that it was not a systematic glitch, nor was it due to any cybersecurity-related issues. Our systems remain secure and protected. The glitch was a result of an uncommon set of conditions that led to the trading halt.

Together with our partner Nasdaq, we took immediate action to resolve these issues and will apply the experience learnt to prevent similar issues from recurring in the future. Learning from the incident, we have worked with our technology service provider Nasdaq to do a thematic review to identify and address other possible software issues that may occur.