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.

What instruments are on offer or traded in our markets that can serve as such tools? What are the policy changes that require rethinking to enable us to develop a deep and liquid hedging market? These are all issues that the FMC will deliberate and offer solutions. We all share the aspiration for our onshore financial market to become a highly competitive market. Not just the foreign exchange market but across all its market segments; money, interbank, bond and the derivatives markets. A market where pricing of ringgit assets are fully determined by a robust price discovery process onshore, driven by real trades and nonspeculative investment activities. We envision a financial market, where it has the breadth to cater to increasingly sophisticated needs of diverse market participants, going beyond trade and financing towards facilitating more effective and efficient risk management activities. A financial market, where it also has the depth to sustain and face any volatility in the market. A financial market, that has ample liquidity across different instruments in all market segments, and extends beyond the ringgit, to the point where it can anchor regional trades and investment activities. Ultimately, we want our onshore financial market to be the market of choice for all market participants, including non-residents, to meet all their financial needs. Before I end my speech, I would like to announce an award that will be presented to a leading derivative bank at the next annual PPKM dinner.