Indonesia’s new commodity exchange and palm oil product seen to complement Bursa’s FCPO
28/10/2026 (The Edge Malaysia) - MARKET players view Indonesia’s plan to establish the Indonesian Commodity and Minerals Exchange (Icomex) in its bid to shift from a passive price taker to an active price maker positively, but say the ability to influence prices also depends on market liquidity, transparency and international participation.
Indonesia’s President Prabowo Subianto announced the new exchange, which is slated to start trading on Jan 4, 2027, in his 2027 budget speech in August, calling for greater state control over the country’s vast natural resources and their proceeds.
The country is a major producer of several strategic commodities and under the Financial Services Authority’s (OJK) supervision, the government hopes to establish an Indonesian reference price for key commodities, namely nickel, crude palm oil (CPO), tin and coal.
Indonesia’s move is closely followed here as Bursa Malaysia Derivatives Bhd’s (BMD) CPO futures contract (FCPO) remains the global benchmark for the commodity, even as similar products are traded on other exchanges. For example, refined, bleached and deodorised (RBD) palm olein futures and options are actively traded on the Dalian Commodity Exchange (DCE) in Liaoning province, China. BMD is a unit under Bursa Malaysia Bhd (KL:BURSA).
“The effectiveness of any futures contract or benchmark will ultimately depend on liquidity, breadth of participation, transparency, regulatory confidence, clearing infrastructure and market acceptance over time. Price discovery should not be viewed as control over prices, but as a transparent mechanism for reflecting market fundamentals, expectations and risk,” says Mohd Saleem Kader Bakas, director of derivatives and carbon markets at Bursa, when asked if Icomex could influence prices.
Nevertheless, he adds that Bursa views the development of regional commodity markets positively, as greater awareness and participation can support more transparent price discovery and risk management for the palm oil industry.
David Ng, senior proprietary trader at IcebergX Sdn Bhd, agrees that the plan to set up Icomex is a positive one, considering Indonesia’s position as the world’s largest palm oil producer and exporter. However, being the largest producer does not necessarily mean having the greatest influence over prices as other factors (mentioned above) matter too. “Icomex could help Indonesia strengthen its pricing influence, but building international market confidence will take time.”
Jakarta Futures Exchange (JFX) deputy CEO Suresh Mookiah says the Indonesian government’s primary objective is to ensure that commodity prices can be influenced by transactions conducted domestically, especially through the exchange. “Indonesia aims to become one of the key venues for price discovery and price references, particularly for products in which Indonesia is a major producer, such as palm oil, nickel and coal.”
Citing the experience of tin trading on JFX, where the transactions for export and domestic sales are executed, Suresh says there is a high level of optimism that the new exchange will succeed in gaining greater influence over commodity prices.
“For your information, almost 100% of Indonesia’s tin exports are currently transacted through JFX,” he points out.
CPO futures are also offered on the Indonesia Commodity & Derivatives Exchange (ICDX) but there is no trading liquidity.
“At present, ICDX’s palm oil contract is not liquid. Therefore, through the new presidential mandate, the government is stepping in with the expectation that it can get the necessary support from local and international industry participants to make the exchange and its products successful,” Suresh explains.
“We are informed that with this [new] exchange, more accurate market data such as production and export will be available for the buyers, sellers and trading community domestically and internationally, enabling transparency of the commodities that will be listed on the exchange.”
While it takes time to build trust and confidence in Icomex, he is confident that the exchange can perform well — especially with the establishment of Danantara Sumberdaya Indonesia (DSI) — and will succeed as one of the global benchmarks for mineral and strategic commodities for which Indonesia is a main producer.
Commencing operations on June 1, 2026, DSI, according to its website, is a centralised state-owned entity mandated to strengthen transparency, governance and value optimisation across Indonesia’s strategic commodity exports covering coal, palm oil and ferroalloys.
Will BMD lose its influence?
The question of BMD losing its dominance as the global palm oil benchmark is viewed as a non-issue as the presence of Icomex could be complementary, much like how the DCE complements BMD.
“As you are aware, the presence of different exchanges can create arbitrage opportunities for market participants between Indonesia and other exchanges,” says Suresh.
He cites the example of the West Texas Intermediate and Brent crude oil contracts that continue to be widely used today. “Different exchanges can operate and grow alongside one another to serve different market purposes. As a result, the market can evolve towards having multiple reference prices for different physical markets, rather than having one benchmark replace another.”
Ng agrees. “I don’t see BMD losing its position anytime soon, given its decades-long track record, established liquidity and international recognition as the global palm oil benchmark. The strong market ecosystem built over the years will continue to keep BMD relevant, although Indonesia’s growing influence in the physical market could gradually strengthen its own pricing benchmark.”
Rather than one exchange replacing another, he believes eventually different benchmarks will serve different markets, similar to the crude oil market.
Mohd Saleem says BMD remains focused on strengthening FCPO’s relevance as a trusted global benchmark while acknowledging that other palm oil contracts can coexist with FCPO where they serve different market needs or domestic objectives. “Ultimately, market participants will continue to gravitate towards contracts that provide liquidity, reliability, transparency and effective hedging utility. Bursa will therefore continue to enhance FCPO’s accessibility, market depth and value proposition to the global palm oil ecosystem.”
The FCPO, with a contract size of 25 tonnes, has been actively traded since October 1980 and effective April 1, 2021, all FCPO physical delivery must be Malaysian Sustainable Palm Oil (MSPO) certified.
According to Bursa, FCPO continues to be the world’s leading CPO futures benchmark, representing about 99% of global exchange-traded CPO futures volume. In 2025, a total of 19.6 million FCPO contracts were traded, equivalent to 490 million tonnes of CPO or more than six times the annual global CPO production, underscoring its deep liquidity and strong global adoption.
“Malaysia had a head start in developing its palm oil futures market and, over the decades, built strong participation from international traders, producers and refiners. Another important factor is the well-established ecosystem of government agencies such as the Malaysian Palm Oil Board and Malaysian Palm Oil Council, which support the industry through research, market information and regular supply and demand data, helping to build transparency and confidence among market participants.
“Together with BMD’s established liquidity and trading infrastructure, these factors have helped Malaysia maintain its position as the global benchmark for palm oil prices,” says Ng.
However, the DCE’s RBD olein futures contract, launched in 2007, has evolved over the years to become the most actively traded palm oil derivatives contract in the world by volume. Its annual trading volume ranges between one billion and two billion tonnes.
This is despite China not producing any palm oil on a commercial scale. The country relies on imports from Indonesia and Malaysia, consuming up to four million tonnes annually — making it the fourth largest consumer of the commodity globally.
“Ultimately, it is not simply about which country produces the most palm oil, but which market participants trust and rely on for price discovery and managing their risks. Indonesia has the advantage in physical supply, while Malaysia continues to lead in futures trading, supported by its established market infrastructure, transparency and international participation,” says Ng.