Bursa Malaysia Gets U.S. Approval

Terry Flanagan

Bursa Malaysia has received regulatory approval for U.S. investors to directly access its market through the CME trading platform as the US exchange expands its Asian products.

Last month Bursa Malaysia Derivatives Berhad was granted registration as a Foreign Board of Trade by the US Commodity Futures Trading Commission. The exchange said in a statement that it can now permit identified members in the U.S. to enter trades directly into its electronic order entry and trade matching system on CME Globex to trade BMD products.

Dato’ Tajuddin Atan, chief executive of Bursa Malaysia, said in a statement: “The benefits of direct market access will certainly be an incentive to draw US traders especially since Malaysia is the global marketplace for palm oil derivatives and the global benchmark for palm oil, namely the Malaysian-ringgit denominated crfude palm oil futures.”

The Malaysian bourse entered a strategic partnership with CME Group in 2009 which allowed its derivatives to be traded globally on CME’s electronic platform.

In June 2013 CME Group launched a US-dollar denominated Malaysian crude palm oil calendar swap, which is based on prices from Bursa Malaysia Derivatives’ crude palm oil futures contract. CME, which owns 25% of the Malaysian exchange, said open interest for this swap had risen above 10,000 contracts since launch and by the end of last October, nearly 52,000 contracts had been cleared.

Last October CME Group said it would launch a US dollar-denominated Malaysian palm olein calendar swap which could be centrally cleared through CME ClearPort. The first of these new swaps were cleared on 4 November 2014 in a trade between two Singapore-based companies.

Nelson Low, executive director, commodity products, CME Group, said in a statement at the time: “The introduction of the palm olein swaps have given market participants additional tools to manage counterparty risk in their underlying cash positions in palm olein, and clients value the ability of inter-dealer brokers to provide them a market to trade in.”

Low said CME was firmly committed to building a complete suite of products for the palm oil industry.

Azila Abdul Aziz, chief executive and head of listed derivatives for Kenanga Deutsche Futures, a Malaysian broker, told Markets Media last year that before the CME deal, derivatives trading was only by voice but electronic volumes had reached 69%.

Bursa Malaysia reported that average daily trading value for securities on the exchange last year rose by 7% from 2013 due to higher trading participation from domestic, institutional and retail investors. For derivatives average daily contracts grew 16% year-on-year driven by record volumes in the crude palm oil futures contracts.

Phupinder Gill, chief executive of CME Group, said in a statement: “Our strategic partnership has paved the way for the internationalisation of BMD in terms of global accessibility and visibility through the migration of its products onto our CME Globex trading platform, and given strength and confidence to the Malaysian derivatives market.”

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