March 10, 2021 (Regulation Asia) - The enhancements aim to create an effective hedging instrument against the physical market and provide an alternative instrument for participants.

BMD (Bursa Malaysia Derivatives) on Monday 8 March 2021 launched a revamped Crude Palm Kernel Oil Futures (FPKO) Contract.

Regulated by the SC (Securities Commission Malaysia), the FPKO contract is designed to provide lauric oil industry players with hedging opportunities against the risk of adverse price movements, while also enabling transparent price discovery for the palm complex market players.

The enhancements aim to create an effective hedging instrument against the physical market and provide an alternative instrument for local and international participants to trade, BMD said.

According to BMD, the palm kernel physical market has seen considerable growth over the years and established itself as one of the Asia’s most important commodities.

“After multiple industry consultations, necessary enhancement was made to provide a better contract based on the industry’s needs and create a positive impact on the development of the Crude Palm Oil Kernel Oil market,” said Samuel Ho, CEO of BMD.

“The revamp will further strengthen BMD’s palm complex offerings and enhance the ‘stickiness’ of traders and hedgers to our marketplace.”

Ho also noted that the revised FPKO could also provide new trading opportunities for other market participants and adds diversity to their existing instruments.

Improvements to the contract have been applied across five main areas, namely the contract grade, delivery points, daily price limits, speculative position limits and a newly-imposed traceability document requirement.