Bursa Malaysia Derivatives Launch The Enhanced 3-Year, 5-Year And 10-Year Malaysian Government Securities Futures Contract

Bursa Malaysia Derivatives (“BMD”) has successfully launched the enhanced 3-Year, 5-Year and 10-Year Malaysian Government Securities (“MGS”) Futures products or better known as FMG3, FMG5 and FMGA respectively, today.

The enhancement to the FMG3, FMG5 and FMGA will create a “Malaysian Sovereign Bond Futures Curve”, which serves as a benchmark for local and foreign investors to estimate the impending interest rates while managing their physical cash MGS exposures. Almost 50 per cent of the MGS contracts are foreign holdings.

The enhancement of the three MGS products are in three areas:

• The extension of the close of trading time from 5.00 pm to 6.00 for FMG3 and FMGA to synchronise with Bursa Malaysia’s Electronic Trading Platform (“ETP”)  operation time, which is until 6.00 pm and to standardise with FMG5. The final trading time which is currently the 3^rd Wednesday of the contract month at 11.00am is also now extended to 6.00pm on the 3^rd Wednesday of the contract month.
• The final settlement price is now largely derived from the Volume Weighted Average Prices (“VWAP”) mechanism of actual cash MGS transactions in the market trades reported in the ETP on the final trading day. The final settlement price for FGM3 and FMGA was previously based on Reuters’ settlement methodology based on submission of the indicative prices of related bonds in the basket.
• Eligibility within the basket of bonds is now widened for FMG3 and FMGA. The maturity range for FMG3 has increased from a range of 2 ½ to 3 ½ years to 2 to 4 years while FMGA is extended from 8 to 10 years to 8 to 11 years. The new eligible basket for MGS Futures, including FMG5, will consist of the benchmark bond and a maximum of two most liquid non-benchmark bonds.

BMD Chairman and Chief Executive Officer of Bursa Malaysia Berhad, Datuk Seri Tajuddin Atan said, “The enhancement of FMG3 and FMGA are intended to make the products more appealing to investors and hedgers which were only available for FMG5 before. In addition, the extended trading hours offer greater flexibility to traders to seize any opportunistic market movements”.

The changes were made after industry consultation and approval from the Securities Commission Malaysia in July this year. FMG3, FMG5 and FMGA falls within the financial product category.