Soybean oil futures now available for trading on Bursa Malaysia Derivatives
18/03/2024 (The Edge Malaysia), Kuala Lumpur - Bursa Malaysia Derivatives Bhd (BMD) has commenced trading of the Bursa Malaysia DCE Soybean Oil Futures (FSOY) contract, the first non-palm-based edible oil futures contract listed on the exchange.
This follows the agreement signed with the Dalian Commodity Exchange (DCE) for the licensing of soybean oil futures settlement price announced in November 2023, said BMD in a statement on Monday.
“We are pleased to be the first exchange outside of China to be granted the licence to incorporate the DCE's commodity futures settlement prices into our product offerings.
“In addition to our existing futures contracts, market participants can now leverage FSOY as a risk-management tool to hedge against price fluctuations in times of market volatility and evolving complexities of international markets,” said BMD chairman and Bursa Malaysia Bhd chief executive officer Datuk Muhamad Umar Swift.
BMD is the operator of the world’s most liquid crude palm oil futures contract, while the DCE operates the world’s most liquid soybean oil futures contract.
“The launch of FSOY is a pragmatic outcome of cooperation that is in line with the ‘Belt and Road’ initiative and celebrates the 50th anniversary of China-Malaysia diplomatic relations.
“It enriches the tools available for global oils and fats industry chain participants to manage price risks and strengthens the connections between the two countries' futures markets,” said a DCE spokesperson.
In 2023, the DCE Soybean Oil Futures Contract was the most traded soybean oil futures contract worldwide, with 204 million contracts traded.
Meanwhile, BMD director Mohd Saleem Kader Bakas said the launch was timely, given the evolving dynamics of soybean oil's usage as both cooking oil and feedstock for biofuels.
“FSOY allows international traders to participate in soybean oil futures trading based on China’s market fundamentals, while simultaneously providing the flexibility to trade crude palm oil futures on the same exchange.
“This enables traders to seize arbitrage opportunities between the two commonly substituted commodities through spread trading,” he added.
FSOY is a US dollar-denominated cash-settled contract, with the final settlement price calculated based on the DCE Soybean Oil Futures Contract’s one-off delivery settlement price on the DCE’s 10th trading day of the delivery month.
BMD explained that the price is then adjusted for conversion from yuan into US dollars, and rounded to the nearest 25 US cents.
“This adjustment allows international traders and exporters of physical soybean products to China to effectively hedge their price risk using the contract,” the exchange said.
Market participants can trade FSOY during the morning and afternoon trading session (9am-6pm on Monday to Friday) and the after-hours (T+1) trading session (9pm-11.30am on Monday to Thursday).