KUALA LUMPUR, Feb 6 (Bernama) -- Malaysia Derivatives Exchange Bhd (MDEX)will launch the crude palm kernel oil (CPKO) futures contract on Feb 20making it the second attempt to introduce CPKO futures in Malaysia.

The contract size will be 25 metric tons with two trading sessions perday, 10:30 am-12:30 pm and 3:00 pm-6:05 pm.

It will be the seventh derivatives products to be offered by MDEX.

"Minister of Primary Industries, Datuk Sri Dr Lim Keng Yaik will launchthe futures contract," said Kuala Lumpur Stock Exchange Bhd's (KLSE) Headof Exchanges Business Units, Dr Zaha Rina Zahari.

Initially, there will be four market makers, Wilmar Trading Pte Ltd, KwokOils Pte Ltd, IOI Edible Oils Sdn Bhd and Fajar Palm Kel Sdn Bhd, she toldreporters after Crude Palm Kernel Oil Futures Contract IntroductorySeminar here today organised by the KLSE.

"There is no limit on the number of market makers. Four is a good numberbut the more market makers we have, the more active the market will bebecause there will always be someone there to quote prices," she added.

The first attempt to launch CPKO futures in Malaysia was in October 1992,and it lasted for only a few months.

Its failure were attributed to factors such as small underlying market,lack of participation from local users and lack of liquidity, said theKLSE Head of Derivatives, Market & Product Development, Shu Meng Chan.

He is confident that the second attempt to introduce CPKO futures will besuccessful as the underlying market now is bigger and the users fromindustry are more sophisticated.

The world's palm kernel production last year increased to 3.0 million tonsfrom 2.975 million tons in 2002.

Malaysia is the largest producer of palm kernel oil with production of1.643 million tons in 2003 as compared with 1.473 million tons in 2002.The country's production is expected to reach 1.824 million tons in 2010.

He said the CPKO futures would close five minutes later than the CrudePalm Oil (CPO) futures market in the second trading session to alllowspillover effect in terms of market participants' reaction from the CPOfutures into the CPKO futures.

On the future development, Dr Zaha Rina said KLSE planned to introduceoptions on crude palm oil futures this year.

"We hope to launch options on CPO futures this year because the palm oiltraders are already familiar with the use of derivatives products. We hopeto spur the options market using the options of the CPO futures first," DrZaha Rina said.

On other plans, she said KLSE also intended to introduce contracts onother commodities such rice and corns in the futures as well as goldfutures denominated in US dollar in Labuan.

"We will be doing feasibility studies first and once we complete them, wewill see whether it will be viable for Malaysia to launch the contracts ornot, and whether to work with other exchanges through strategicalliances."

One form of strategic alliance is to offer the products of other exchangeson the exchange in Malaysia and products in Malaysia on exchangesoverseas, she said.

"So they can trade in our products and we can trade in their products,"she said.

-- BERNAMA