Malaysian Government Securities (MGS) are medium to long-term borrowings by the government for financing long-term developmental projects. MGS are issued and managed by Bank Negara Malaysia on behalf of the Government of Malaysia. MGS are considered gilt-edged securities, issued via auction and subscription with interest payable semi-annually.
FMG5 is a cash settled futures contract to buy or sell the Five-Year Malaysian Government Securities at a future date. Eligible MGS must meet the specifications of the contract. Among the specifications are that they must mature between 4 ½ to 5 ½ years, with a minimum issuance size of RM500 million. Upon maturity of FMG5 contracts, the buyer and seller will settle using the final settlement value.
Executive Chairman of MDEX, Encik Abdul Jabbar Abdul Majid said as an incentive for participation in the FMG5, MDEX is offering a trading fee holiday for three months from 29 March 2002 to 28 June 2002 for market participants and a trading fee holiday for six months from 29 March 2002 to 28 September 2002 for market makers and MDEX Locals.
"FMG5 provides expanded opportunities for risk management and hedging for market participants, especially in dealing with movements of interest rates. The uses and benefits of participating in FMG5 are applicable to a very wide range of the financial market segment including financial institutions, insurance companies, bond portfolio managers, provident funds, asset managers, corporate treasurers, individual investors, as well as MDEX local members," he said.
"Additionally, institutional participants of the Malaysian ringgit bond market with medium to long-term interest rate exposures would find FMG5 an excellent hedging instrument, which also serves as a pricing benchmark and a price discovery tool" Abdul Jabbar added.
Besides the FMG5, other products currently traded on MDEX are Kuala Lumpur Stock Exchange Composite Index Futures (FKLI), Kuala Lumpur Stock Exchange Composite Index Options (OKLI), Crude Palm Oil Futures (FCPO) and Three-month KLIBOR Futures (FKB3). These products are traded electronically through KATS (an automated trading system) in an efficient and secure manner.
"The FMG5 is a significant development for the Malaysian capital market, contributing to a wider range of derivative products which would improve the liquidity in the secondary bond market" Abdul Jabbar Abdul Majid said.
In conjunction with the launch of FMG5, MDEX is standardising the trading hours for the Three-Month KLIBOR Futures Contract (FKB3) with that of FMG5.
With effect from 29 March 2002, FKB3 will commence trading at 09.00 a.m. The following trading related times will also come into effect on 29 March 2002:
| Previous Trading Hours FKB3 | Trading Hours with effect from 29 March 2002 - FMG5 / FKB3 | |
| Pre-Trading | 09.00 a.m - 09.20 a.m | 08.30 a.m - 08.50 a.m |
| Pre-Opening | 09.20 am - 09.30 a.m | 08.50 am - 09.00 a.m |
| Netting/Trading | 09.30 a.m - 12.30 noon | 09.00 a.m - 12.30 noon |
| Halt | 12.30 p.m | 12.30 p.m. |
| Pre-Opening | 02.00 p.m - 02.30 p.m | 02.00 p.m - 02.30 p.m |
| Netting/Trading | 02.30 p.m - 05.00 p.m | 02.30 p.m - 05.00 p.m |
| Post Full Trading | 05.00 p.m - 05.45 p.m | 05.00 p.m - 05.45 p.m |
| Post Restricted | 05.45 p.m - 06.00 p.m | 05.45 p.m - 06.00 p.m |
| Batch | 06:00 p.m onwards | 06:00 p.m onwards |
Trading hours for the other products currently traded on MDEX will remain status quo.
