Selangor Journal
Oil palm bunches seen in a wheelbarrow at a plantation in Kuala Selangor on April 26, 2022. — Picture by REUTERS

Bursa Malaysia derivatives FCPO trading volume in 2022 achieved historical high of 16.2 mln contracts

KUALA LUMPUR, March 8 — Bursa Malaysia Derivatives Bhd (BMD) marked a historical record for crude palm oil futures (FCPO) trading volume in 2022, with 16.2 million contracts or equivalent to 405 million tonnes of palm oil traded through the exchange.

BMD director Mohd Saleem Kader Bakas said the excellent trading performance was more than five times that of global CPO production, amid price volatility last year.

“At the same time, the exchange also achieved the highest ever total trading volume for all products combined for the third consecutive year, with 19.1 million contracts traded in 2022.

“FCPO continues to be the global price benchmark for the crude palm oil market, with foreign institutions increasing their participation in the derivatives market, accounting for 54 per cent of our total product trading volume, up from 46 per cent in 2021,” he said at the Palm & Lauric Oils Price Outlook Conference & Exhibition (POC2023) on BMD Highlights.

Mohd Saleem said the milestones signified the strong appeal of Bursa Malaysia Derivatives’ products to market participants as well as the confidence that investors have in using its products for price risk management.

The exchange, he said, is committed to offer risk management solutions to market participants for hedging risk exposures in this constantly evolving market environment.

He noted that since the launch of the East Malaysia Crude Palm Oil Futures (FEPO) contract in October 2021, BMD has successfully facilitated its physical deliveries in all three delivery ports in East Malaysia. In 2022, there were over 5,000 FEPO contracts traded.

“We remain positive on the increasing market participation and will continue our efforts to promote greater awareness of this contract,” said Mohd Saleem.

He said ICS, an exchange-listed inter-commodity spread between both crude palm oil futures contracts, namely FCPO and FEPO, was introduced to allow for a seamless spread trade execution between the two contracts.

It offers investors the ability to take advantage of the differential value between the two futures contracts, hence allowing for greater hedging of their positions.

He said the Alternative Delivery Procedure (ADP) was introduced on Sept 26, 2022 to ease the constraints on trading for delivery limited by the number of approved locations for the physical delivery of FCPO, FEPO and Crude Palm Kernel Oil Futures (FPKO).

Meanwhile, since the introduction of After-Hours Trading in December 2021, Mohd Saleem said the exchange has seen an increase in trading volume during the night session.

On December 1, 2022, the After-Hours Trading session recorded the highest daily volume with 19,065 contracts traded.

“We have also seen average night trading volume of more than double year-on-year to 7,672 average contracts in 2022, which amounts to 10 per cent of the total day and night average trading volume,” he said.

Furthermore, its clearing house Bursa Malaysia Derivatives Clearing Bhd was recognised as a Tier 1 Third Country Central Counterparty, or TC-CCP, on November 7, 2022 by the European Securities Market Authority,

This would enable Bursa Malaysia Derivatives Clearing to provide clearing services to members or trading venues established in the European Union under the European Market Infrastructure Regulation (EMIR) requirement.

“This effectively makes Bursa Malaysia Derivatives Clearing a more attractive proposition to Europe-based investment firms and banks as their capital requirement for exposures to clearing houses are significantly lower when dealing with qualifying TC-CCPs,” he said.

He added that the exchange is continuing its effort in driving towards the sustainable development in the palm oil supply chain through strategic collaborations and has been formally admitted as an affiliate member of the Roundtable on Sustainable Palm Oil (RSPO) on June 24, 2022.

— Bernama

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