12/08/2009 (MY Palm Oil) - CME Group Inc, the world's largest derivatives exchange, will take a minority stake in Bursa Malaysia Bhd's derivatives business, officials said.

Discussions are ongoing and should be finalised in a matter of weeks, Bursa's chief executive officer (CEO) Datuk Yusli Mohamed Yusoff said. "It's a minority stake. We're still finalising the negotiations," he told reporters on the sidelines of the World Capital Markets Symposium in Kuala Lumpur yesterday.

In return, Bursa will also take a small stake in the Chicago-based CME, the latter's CEO Craig Donahue told Business Times on the sidelines of the same conference.

The two companies announced in a press statement yesterday that they were working on a collaboration involving trade matching services, product licensing and minor cross-equity investments. The deal needs regulatory approval, they said.

Yusli said the partnership is aimed at globalising the Malaysian crude palm oil (CPO) futures market. "Through this collaboration, we expect the resulting expertise and knowledge transfer to further facilitate our goal for a robust derivatives exchange," he said.

CME will use Bursa's ringgit-denominated crude palm oil futures contract (FCPO) settlement prices, which will enable CME to develop a US dollar-denominated cash-settled CPO futures contract and its related options for listing on one of CME's US registered exchanges.

The product is expected to be traded on CME's electronic trading platform, CME Globex. This means that CME's customers from other markets would be able to access Bursa's derivatives markets and products on CME Globex, which is the most widely distributed electronic trading platform in the world.

"This proposed partnership will allow us to continue to expand our transaction processing business opportunities, increase our presence in Asia as well as help our Malaysian partners grow their business," Donahue said in the statement.

Bursa's shares, which were suspended from trading for an hour in the morning pending the announcement, ended the day 2 sen lower at RM8.29.