Bursa Malaysia to launch $ CPO futures by Sept

Written by Dhimant Bhatt | Mumbai, May 30 | Updated: May 31 2008, 06:31am hrs
Bursa Malaysia, a leading futures and options exchange, is planning to launch its much awaited USD crude palm oil (CPO) futures, known as FUPO, by September 2008 in Malaysia.

This is a US dollar denominated palm oil futures contracts which compliments the existing MYR (ringgit) denominated crude palm oil futures (FCPO) contract.

It is a cash settled contract which does not involve physical delivery of the underlying CPO. Cash settlement is based on the final settlement value.

We are planning to launch our USD crude palm oil futures in the third quarter of the year. We are in the process to finalise the market making segment. We are looking for good participation from market makers - both individual and institutional players. In fact, there will be no cap for number of market makers. We expect market markers from India and we are also inviting Indian players for this segment, Raghbir Singh Bhart, head-global markets, Bursa Malaysia Berhad told FE.

The contract unit will be 10 tonne and the minimum price fluctuation will be USD 0.25 per metric tonne. Daily price limit is 10% above or below the settlement prices of the preceding business day. The 10% limits would be applied to all quoted months for the fest of the first trading session.

The availability of both FUPO and FCPO will provide arbitrage opportunity from price discrepancies between both contracts. The foreign parties are also able to trade this contract without the need of ringgit conversion thereby reducing their currency exposure risk, he said.

The exchange rate of USD/MYR is taken from the Central Bank of Malaysia, Bank Negara as the conversion price for the calculation of final settlement value, sources said.

Speculative position limit will be 500 contracts net long or net short for spot month, 5,000 contracts for any single contracts except for the spot month and 8,000 contracts for all contracts months combined.