KUALA LUMPUR, Dec 4 — Bursa Malaysia Derivatives Bhd (BMD) has crossed another milestone with the successful completion of the first physical delivery of the Five-Year Malaysian Government Securities (MGS) Futures Contract (FMG5).
This follows the re-launch of FMG5 on September 18, 2020, with a revised settlement methodology from cash to physical delivery, Bursa Malaysia said in a statement today.
The delivery of the MGS, amounting to RM11 million in principal value from the seller to the assigned buyer of FMG5, was done via a Delivery versus Payment (DvP) model on the Rentas system.
The exchange said the Securities Linked Settlement functionality available on Rentas was utilised for the first time.
“It enabled Bursa Malaysia Derivatives Clearing Bhd to act as the central counterparty to facilitate the exchange of MGS and cash payment.
“This is also the first tripartite DvP transaction involving a buyer, seller and central counterparty whereas other DvPs on Rentas only involves two parties,” it said.
Meanwhile, BMD chairman and Bursa Malaysia Bhd chief executive officer Datuk Muhamad Umar Swift said the exercise demonstrates the efficiency of the MGS delivery mechanism, put in place by the exchange and the clearing arm.
“The change in the settlement method is a crucial modification that enhances the appeal of FMG5 as an effective hedging instrument for their MGS holdings,” he said.
The enhanced delivery mechanism, which is in line with the Financial Markets Committee’s development initiatives is a clear improvement towards the market’s accessibility and liquidity of the domestic financial market.
“We hope the seamless delivery mechanism will enable the emergence of a strong market-based facility for risk management and price discovery in the MGS market,” Umar added.
Since the re-launch of FMG5, the cumulative value traded stands at RM30 million as of December 1, 2020.
— Bernama
