.jpg)
Dalian Commodity Exchange (DCE) and Bursa Malaysia Derivatives Berhad (BMD) officially signed the soybean oil futures settelement price licensing agreement on November 2, 2023, during the 17th China International Oils and Oilseeds Conference (CIOC). Yan Shaoming, CEO of DCE, and Datuk Muhamad Umar Swift, Chief Executive Officer of Bursa Malaysia and Chairman of BMD, signed the agreement on behalf the two exchanges. Ran Hua, Chairman of DCE, attended the signing ceremony, which was presided over by Cheng Weidong, Vice President of DCE.
According to the agreement, DCE authorizes BMD to use the soybean oil futures delivery settlement prices for its “BMD-DCE Soybean Oil Futures Contract,” which is proposed to be launched in 2024. Its underlying is the same as that of DCE’s soybean oil futures contract, which will use DCE soybean oil futures delivery settlement price as the basis for cash settlement at expiration. This collaboration marks the first time in the Chinese futures market that an Asian exchange is authorized to directly use Chinese commodity futures delivery settlement prices for new product development. It also represents the first instance in the Malaysian futures market of using overseas commodity futures prices as the reference for cash settlement.
DCE stated that since the signing of a memorandum of understanding with BMD’s parent company, Bursa Malaysia, in 2006, the cooperation between DCE and BMD has continued to expand. In recent years, under the leadership of the China Securities Regulatory Commission (CSRC), DCE has actively promoted institutional opening-up to the outside world, hoping that this collaboration will serve as an opportunity for both parties to further enhance business practices and exchange innovative ideas. In doing so, both parties will strengthen market interconnectivity, better serve the international oil industry, bilateral trade, and contribute to the success of the “Belt and Road Initiative”, and achieve mutual benefits.
BMD noted that as the leading commodity derivatives trading market in the ASEAN region, they are constantly exploring innovations to assist market participants in addressing the complexities of the international market and identifying trading opportunities. Through this collaboration, BMD is delighted to provide investors with easy access to a wider range of futures trading options and offer effective solutions for industry participants to manage cross-market risks.
Soybean oil is one of the world’s major edible oil products, and soybean oil futures is the first oil futures listed by DCE, with market functions being fully realized since 2006. DCE’s soybean oil futures has been widely utilized by industrial enterprises. In 2022, it was introduced to overseas traders as specified domestic products. Presently, soybean oil crushing by oils and oilseeds companies participating in DCE accounts for over 90% of the national total. From January to October this year, the daily average trading volume of soybean oil futures reached 858,000 lots, and the daily average open interest 907,000 lots. This performance demonstrates strong price representation, liquidity, and international industry recognition, laying a solid foundation for the licensing of delivery settlement prices. This cooperation will provide useful tools for businesses in countries along the “Belt and Road,” especially in the ASEAN region, to hedge against soybean oil price fluctuations and to facilitate arbitrage trading in related oils and oilseeds futures products offered by DCE and BMD for investors.
