MARKET DEVELOPMENT
Bursa Malaysia Plans to Start RBD Palm Olein Futures This Year
Bursa Malaysia Plans to Start RBD Palm Olein Futures This Year
28/02/2014 (Bloomberg) - Malaysia will start a futures contract for refined, bleached and deodorized palm olein in 2014 so that refining margins can be hedged, according to the head of the country’s derivatives exchange.
“As markets become more competitive, a processing margin is no longer guaranteed,” Chong Kim Seng, chief executive officer of Bursa Malaysia Derivatives Bhd., said in an interview in Kuala Lumpur today. “The processing margin becomes very volatile, depending on the cost of feedstock or raw materials, and the selling price of the products.”
Malaysia wants to broaden its range of financial products after establishing itself as the largest center for crude palm oil trading and Islamic finance. Bursa, owned 25 percent by CME Group Inc. and the rest by Bursa Malaysia Bhd., started a gold futures contract in October, and 24,253 contracts were traded by the end of 2013, according to Chong.
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“This new contract will benefit the exporters and importers of RBD palm olein,” Chandran Sinnasamy, head of trading at LT International Futures Sdn., said by phone. “It’s an additional avenue for them to hedge to reduce their risk.”
The exchange is also looking into rubber and silver futures contracts, said Chong, without giving timeframes. A rubber futures contract may emulate palm oil’s success as Malaysia is both a producer and consumer, being one of the top makers of rubber gloves and condoms, while demand for silver was growing in Asia, he said.
Volumes for crude palm oil may double in three years time from the 200 million tons traded on the exchange in 2013 as demand grows, said Chong, speaking before a palm oil industry conference next week organized by BMD and CME. Some 100 million tons were traded in 2010, double the 50 million tons about three to four years earlier, he said.
“As markets become more competitive, a processing margin is no longer guaranteed,” Chong Kim Seng, chief executive officer of Bursa Malaysia Derivatives Bhd., said in an interview in Kuala Lumpur today. “The processing margin becomes very volatile, depending on the cost of feedstock or raw materials, and the selling price of the products.”
Malaysia wants to broaden its range of financial products after establishing itself as the largest center for crude palm oil trading and Islamic finance. Bursa, owned 25 percent by CME Group Inc. and the rest by Bursa Malaysia Bhd., started a gold futures contract in October, and 24,253 contracts were traded by the end of 2013, according to Chong.
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“This new contract will benefit the exporters and importers of RBD palm olein,” Chandran Sinnasamy, head of trading at LT International Futures Sdn., said by phone. “It’s an additional avenue for them to hedge to reduce their risk.”
The exchange is also looking into rubber and silver futures contracts, said Chong, without giving timeframes. A rubber futures contract may emulate palm oil’s success as Malaysia is both a producer and consumer, being one of the top makers of rubber gloves and condoms, while demand for silver was growing in Asia, he said.
Volumes for crude palm oil may double in three years time from the 200 million tons traded on the exchange in 2013 as demand grows, said Chong, speaking before a palm oil industry conference next week organized by BMD and CME. Some 100 million tons were traded in 2010, double the 50 million tons about three to four years earlier, he said.