The Thailand Futures Exchange plc (TFEX), under The Stock Exchange of Thailand group, plans to launch oil futures on October 17. The new product is expected to help entrepreneurs to manage energy related cost and will serve as alternative investment for investors and diversify risks for their portfolio.
TFEX is in the process of testing related systems with the clearing house and its members and is expected to complete the test process by the end of September, said TFEX Managing Director Kesara Manchusree.
TFEX Oil futures will be based on Brent crude oil prices, which are one of the most improtance global oil benchmarks. The contract size is set at 100 barrels per contract. It is worth around THB 330,000 (approx. USD 11,000) and is cash settled contract. The oil futures will be trading since morning until the end of the night session (10:30 p.m.). It is expected that the margin rates for retail clients will be at around THB 33,500 per contract. However, the official margin rate will be announced in early October after the clearing house review and incorporate the latest figures.
“TFEX is discussing with oil companies and TFEX members to serve as market makers for oil futures. We expect to get a conclusion soon. We believe that market maker will help provide liquidity in the market and enhance investors’ confidence in oil futures trading,” Kesara said.
“We are confident that oil futures will be popular among investors, as the commodity product is gaining popularity and attraction from investors. For the Thai market, it is a new financial instrument for investors, enabling them to make profit from the movement of oil prices with speed and convenience,” she added.
“Based on our study, crude prices have low correlation with stock prices. Therefore, it should help investors to diversify risk from equities portfolio. For corporate investors, they could use oil futures to manage fuel cost, especially for small- and medium-business owners who have a high fuel cost burden, e.g., for transportation and logistics.”
