As part of our policy of non-internationalization of ringgit, we prohibited the trading of ringgit assets and products outside of our jurisdiction. It undoubtedly the opaque pricing mechanism has adverse impact on the domestic financial market, price discovery process and the stability of the financial market. Accordingly, when there were reports of ringgit futures contracts being introduced on offshore exchanges, we issued reminders to onshore financial institutions and corporations against participating in them. The prohibition also encompassed engaging in any onshore FX transaction with non-residents that could be deemed as facilitating offshore ringgit transactions. These rules are not new but have been there all this while. We also instituted several measures this week as volatility also picked up sharply after the US Presidential election result. Because of adverse consequences on genuine investors and businesses, we should no longer tolerate the NDF market and its damaging influence over the onshore pricing of ringgit. Let me make it doubly clear on this. Onshore banks are reminded against quoting onshore ringgit opening price referencing to the offshore prices. Markets should not price ringgit excessively or out of sync with the underlying fundamentals. We have also reminded onshore banks to avoid dealing in FX with non-resident banks suspected of engaging in NDF speculative activities except for those that provide confirmation of their non-involvement in the offshore ringgit NDF market. This week has seen many noises surrounding these measures. There is no new policy on capital flows. There is no proxy capital control either.

While this measure may appear harsh, it has worked to some extent to reduce the NDF related flows into the onshore financial market. In mid-2016, following extensive discussions with financial market players through the FMA, we reviewed the ringgit fixing mechanism to enhance its integrity. The new fixing, now known as KL 2/5  BIS central bankers' speeches  USD/MYR reference rate, uses transaction data in the determination of the reference rate. While it enhances the credibility of the fixing mechanism, the new methodology has also greatly reduced the ability of the offshore NDF related transactions to capitalize on the reference rate process. The initiative, which was implemented smoothly with positive market response, also had the desired outcome in further reducing the volume of ringgit speculative flows. Throughout the year, we have also strengthened our monitoring of compliance to the existing Foreign Exchange Administration (FEA) rules. FIs have been strongly reminded to be cautious in facilitating FX transactions, particularly with NRFI, to ensure that they do not become unwitting facilitators of ringgit speculative activities. Accordingly, we expect banks to conduct robust due diligence and Know-Your-Customer (KYC) process to fully understand clients’ transactions. We believe that the enhancement of such processes will enable banks to detect transactions that could be related to NDF activities in ringgit. Prompt supervisory intervention will be taken against any individuals and banking institutions that are found to facilitate NDF market activities. Another area which we looked at was the exchange traded ringgit products in the offshore markets.