we will be looking at further measures, similar to these. the idea behind these measures is to make our onshore financial market more flexible, facilitative and competitive. in other words, we are deepening the onshore markets towards becoming the main actor to conduct the foreign exchange needs of our economy. this journey will be exciting and require some behavioural changes. but we have no doubt that with the full support of the industry, we can achieve these outcomes. i envisage the fmc and the industry to further collaborate and come up with the new strategies and ideas to deepen and support the development of our onshore market. beyond trade or real sector activities, we should look at financial investments, in particular the non - resident investors in our bond market. we have 33. 7 % of our government bond market held by such investors. there are opportunities in this domain. 4 / 5 bis central bankers'speeches where are they hedging their foreign exchange exposures? what product can the industry offer for them to hedge onshore? given these obvious opportunities, we need to develop solutions that will benefit the industry as a whole. the significant overseas investments by residents and foreign currency exposures arising from trade activities create a need for the domestic hedging market to be further deepened. in 2015, fx market transactions volume reached a staggering usd2. 52 trillion, yet currency derivatives such as fx forwards and options only made up 5 and 1 percent of the total volume, respectively. similar concerns also exist for the bond market. both government and corporate bonds are still primarily held by residents, and we have one of the largest corporate bond markets in the region. yet, this does not translate into the development of active hedging market activities. credit derivatives made up less than 1 percent of ringgit derivatives volume in 2015. this prompts several questions. are our investors able to hedge effectively or efficiently manage the exposures of their portfolios? 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

offshore market, which is driven by speculative interest, lacks the onshore market ’ s diverse spectrum of market participants and information. this was notably mentioned by the federal reserve bank of new york paper in may 2005, that an estimated 60 to 80 percent of ndf volume is generated by speculative interest. because of this, ndf tends to promote herd behavior which compounds the lack of two - way market liquidity. prices may move rapidly in one direction or another driven purely by fickle sentiment, as well as leveraged positions taken on by the speculators, making them inherently unsuitable to represent an efficient and objective price discovery process for the ringgit. compounding this further, the offshore ndf markets are highly opaque and information on these markets can only be gleaned through the bis ’ triennial survey and other sources such as through mandatory reporting of derivatives and swap data repositories on us financial institutions. actions by bnm / the market with increasing concern over the offshore market negative spill - over impacts, bnm has taken a broad spectrum of actions to reduce the speculative and damaging influence of ndf activities. because of the estimated volume and its opaqueness, the ndf market clearly has the potential to undermine the integrity and financial stability of the onshore market. bnm has the responsibility to ensure orderly functioning of the foreign exchange market and to maintain public confidence in the financial system. we have, over the years, taken proactive actions to slowly root out the speculative elements in the onshore market. from end 2014, we have significantly reduced the availability of short - term central bank papers that were used for short - term investments that support the ndf market and speculation on the ringgit. such actions were taken despite our cognisance that such papers provide an efficient liquidity management instrument to our own market players. but increasingly, over the years, it had become an instrument of choice in facilitating the speculative flows. holding of these papers had been dominated by the nrfi. at one time, as much as 96 percent of our bnm short term papers were held by nrfi. the yields on these papers have consistently trended below the policy rate showing the extent of speculative elements, which would not happen under normal circumstances. consequently, we no longer issue these papers on a regular basis. in 2015, to ensure a more reflective pricing mechanism of the domestic market, a more direct attempt to cut off the pricing linkage between onshore and the offshore market was made. banks were