Liquidity management is crucial point in the banking operation. In general terms, liquidity refers broadly to the ability to trade instruments quickly at prices that are reasonable in based on underlying demand and supply conditions through the depth, breadth and resilience of the market at the lowest possible execution cost. The concern over liquidity management is also related to Islamic bank that holds illiquid assets while its liabilities are liquid, and holds assets that are unpredictable in value’s volatility while guaranteeing the value of its liabilities. Islamic banks would usually possess illiquid asset which is used as a commodity of transaction. As Islamic banks also follow the same accounting system of a commercial bank, Islamic banks would be exposed to liquidity risk.
In this regard, this paper demonstrates how Malaysia Islamic capital market manages liquidity through Islamic secondary market, and explains Bursa Suq al-Sila as one of the important secondary markets in Malaysia. In addition, this paper presents the calculation of market liquidity in Malaysia secondary market. Key market liquidity indicators and latent liquidity would be demonstrated in order to prove that Malaysia Islamic secondary market would maintain the proper level of liquidity.