Bursa Malaysia Readies Islamic Short-Selling System

Mar 31 2009 | 2:03am ET

Eyeing the growing Shariah-compliant hedge fund market, Malaysia’s stock exchange is readying a platform to facilitate short-selling, which is generally barred by Islamic law.

Bursa Malaysia’s regulated platform would likely involve short-sellers actually buying, rather than borrowing, the shares they are betting against. Islamic law forbids selling things that one doesn’t actually own; the stock market’s plan would have hedge funds and other investors buy the stock for a fraction of its value while simultaneously agreeing to sell it back to the seller at a later date, Reuters reports.

“This will help in bringing in Islamic hedge fund activities,” Bursa Malaysia CEO Yusli Mohamed Yusoff told Reuters. “Short-selling is an essential ingredient for capital markets to perform efficiently.”

Yusoff added that the precise structure of the short-selling system is still “being worked on.”


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