Kanbawza Group is hoping to set up its own OTC market next year, with two of its entities already granted separate licences to operate as an underwriter and settlement bank for Yangon’s new stock exchange.
The group is hoping to set up an OTC market early next year, and is looking for companies to collaborate with, Nay Myo Aung, chief financial officer at KBZ Bank and IKBZ Insurance, told The Myanmar Times.
Myanmar’s Securities and Exchange Law stipulates that a minimum of three securities companies can jointly apply to the Securities and Exchange Commission to set up an OTC market, said a spokesperson for Daiwa Securities Group, which co-owns the Yangon Stock Exchange. But it is not clear whether the SEC will allow private companies to set up OTC markets.
The Myanmar Securities Exchange Centre (MSEC) operates an OTC market, but it lacks modern infrastructure, and trading in its two listed companies is rare. MSEC chair U Maung Maung Thein said at the stock exchange’s launch this month that a new OTC market would be established. But further details have not been made public.
Daiwa is not involved in developing the legal or regulatory framework for the new OTC market, said the spokesperson. But there may be a plan to create specific rules, such as listing criteria, for the new OTC market, he added.
In the meantime, the two companies on the MSEC’s existing OTC market – Forest Products Joint Venture and Myanmar Citizens Bank – could soon be reduced to one. Myanmar Citizens Bank is one of the companies selected to list on the new stock exchange next year.
“It will be not possible to trade Myanmar Citizens Bank’s stocks on the MSEC’s OTC market after [Myanmar Citizens Bank] lists on Yangon Stock Exchange,” said the Daiwa spokesperson. The MSEC is allowed to operate its existing OTC market until 2020, but can review operations when necessary, the spokesperson added.
KBZ group already has an underwriting license for its joint venture KBZ Stirling Coleman, and has discussed IPOs with all six of the companies selected to list, U Nyo Myint, senior managing director for KBZ Group, said at a press conference last week. KBZ Bank was also the first lender to be designated a settlement bank for the exchange, and now has its license, he added.
KBZ had competed with five other private banks to be the designated settlement bank, which is responsible for delivering the stocks and money payments after trades have been agreed on. If the broker or dealer representing the buyer cannot immediately make a payment, it will be KBZ’s responsibility to provide the funding short-term.
The settlement bank must ensure it has sufficient liquidity to support these transactions and the infrastructure in place to complete exchanges, including digitally linking to different trading and banking systems. KBZ is collaborating with six other local banks, to offer its settlement services to customers of those banks, said U Nyo Myint.
One advantage of being a settlement bank was an increase in deposits, U Mya Than, chair of Myanmar Oriental Bank, told The Myanmar Times. Some entities involved in an IPO process would have to open an account with KBZ, as would customers of other banks that wanted to buy or sell shares, he added.
But U Zaw Lin Aung, director of KBZ Stirling Coleman, said that becoming a settlement bank did not make KBZ Bank stronger than other local commercial banks. Operating as a settlement bank was more investment banking than commercial banking, he said. “The nature of the business is different”
