10/04/2012 (The Malaysian Reserve) - Bursa Malaysia Derivatives Bhd (BMD) plans to revamp its membership rules and launch new contracts in an effort to improve access and liquidity on the exchange.

The revamp proposes decoupling the clearing membership from the trading membership and allowing market participants to be either clearing or trading members, all of which may likely lead to the entry of new brokers into the 20-strong broker member industry now.

“Currently, a clearing member must also have a trading membership while a trading member doesn’t have to be a clearing member. The exchange has received enquiries from various institutions to become clearing members or trading members, so we are working towards facilitating that,” Chong Kim Seng, chief executive officer of BMD told The Malaysian Reserve.

Trading participants equal to futures brokers and clearing participants equal to clearing members on the exchange.

Chong said BMD is talking to a number of parties including foreign banks to facilitate their requests, adding that the institutions must be incorporated onshore to become clearing members but not so trading members. He did not give any names or time line for the change in membership status.

Chong said the proposed changes are meant to support BMD’s target of increasing contract trade volume to 13 million contracts or an average 50,000 contracts daily in 2013 from about 8.4 million contracts or 34,474 contracts a day last year.

The offering of BMD-traded contracts on the CME Group’s Globex trading platform saw contract volumes on BMD rise 35.5% year-on-year to 8.4 million contracts in 2011 from 6.2 million in 2010.

In line with the exponential growth in volumes, BMD launched a new derivatives clearing and settlement system in February to provide a faster and more efficient clearing and settlement services for its participants and to pave the way for the introduction of new derivative futures and options products.

The new market ecosystem such as the clearing and settlement system and the direct market access are part of the BMD’s plan to attract target new entrants like hedge funds, high frequency and proprietary traders to bring further breadth and depth to the exchange.

Chong said the exchange plans to launch options contract on the futures equity index and the futures crude palm oil contracts. An olein futures contract will be launched as well, targeting potential clients like plantations companies, edible oil traders and other investors.