Bursa Malaysia To Grow Derivatives Market By 40% - Reduced Derivatives Transaction Fee And Revised FCPO Contract Specifications To Accelerate Market Growth

Bursa Malaysia aims to grow its derivatives market by 40% in 2007.  The exchange today announced key changes to its derivatives fee structure and Crude Palm Oil Futures Contract (FCPO) specifications, both of which are aimed at accelerating the growth of the Malaysian derivatives market.

The new derivatives transaction fee structure will take effect from 1 April 2007 and covers the KLCI Futures Contract (FKLI), FCPO and its Financial Derivatives Futures Products, namely the FKB3, FMG3, FMG5 and FMGA.

Dato’ Yusli Mohamed Yusoff, Chief Executive Officer of Bursa Malaysia Berhad said, “Recent and further anticipated volume growth of our derivatives market provides us with an opportunity to revise our fee structure and pass some of the savings back to investors.  The reduced transaction fees will align us better with other markets and also increase our pricing competitiveness.”

The revised fee structure encompasses a reduction of trading and clearing fees as set out below.  In addition the exchange will also implement a reduction in the hair cut rate imposed on shares lodged as collateral and an increase in the rate of the interest paid for Ringgit cash lodged as collateral.
 

The exchange also announced revisions to its FCPO contract specifications which include the introduction of new contract months, increase in position limits and change from static to dynamic price limits.   The new specifications take effect from 16 March 2007.
 

Our FCPO is currently a global pricing benchmark for crude palm oil futures.  However, global competition in this sector is increasing alongside demand for the commodity, making it essential for us to ensure that our FCPO remains relevant to evolving market needs.  The revised contract specifications provide greater trading flexibility and increase our FCPO’s efficiency, making it a more competitive contract.”

The revised specifications will enable Bursa Malaysia’s FCPO to trade up to 24 months forward, with the introduction of 6 additional alternate month contracts.  Previously, the FCPO available for trading were spot, next 5 succeeding months and thereafter, alternate months up to 12 months forward. 

The new revision also allows for the increase in FCPO speculative position limits.  Spot month position limit is maintained at 500 contracts, whilst the position limit for any other single month will be increased from 3,000 to 5,000 contracts. The position limit for all months combined will be increased from 5,000 to 8,000 contracts.

The price limit for FCPO will also be changed from a static to a dynamically managed one in line with movement of market prices.