In a significant move to expand the breadth of its commodity offerings and enhance global accessibility and interest in Malaysian derivatives market, Bursa Malaysia Derivatives Berhad (“Bursa Malaysia Derivatives” or “the Exchange”) today commenced trading of the Bursa Malaysia DCE Soybean Oil Futures (“FSOY”) contract. This follows the agreement signing between Bursa Malaysia Derivatives and Dalian Commodity Exchange (“DCE”) for the licensing of soybean oil futures settlement price announced in November 2023.
The FSOY contract marks the first non-palm-based edible oil futures contract to be listed on Bursa Malaysia Derivatives, the operator of the world’s most liquid crude palm oil futures contract. DCE, on the other hand, operates the world’s most liquid soybean oil futures contract. The relative prices of palm and soybean oils, the two most widely consumed edible oils, are important for market players particularly food manufacturers, as the oils are frequently used interchangeably as recipe ingredients.
Datuk Muhamad Umar Swift, Chairman of Bursa Malaysia Derivatives and Chief Executive Officer of Bursa Malaysia Berhad said, “One important aspect of fostering a more facilitative and competitive marketplace entails expanding our derivatives offerings and establishing cross-exchange collaborations. We are pleased to be the first exchange outside of China to be granted licence to incorporate DCE's commodity futures settlement prices into our product offering. In addition to our existing futures contracts, market participants can now leverage FSOY as a risk-management tool to hedge against price fluctuations in times of market volatility and evolving complexities of international markets.”
A spokesperson of Dalian Commodity Exchange said, “The launch of FSOY is a pragmatic outcome of cooperation that is in line with the "Belt and Road" initiative and celebrates the 50th anniversary of China-Malaysia diplomatic relations. It enriches the tools available for global oils and fats industry chain participants to manage price risks, and strengthens the connections between the two countries' futures markets. Moving forward, DCE will continue to explore ways to enhance communication and deepen cooperation with overseas exchanges, steadily increase its level of opening-up, and serve the stable and healthy development of global commodity trade.”
As the world's largest importer of soybeans and the largest consumer of soybean oil, China has been instrumental in driving the development of the soybean oil complex within the global derivatives market. In 2023, the DCE Soybean Oil Futures Contract remains the most traded soybean oil futures contract worldwide with 204 million contracts traded.
Mohd Saleem Kader Bakas, Director of Bursa Malaysia Derivatives said, “The introduction of the FSOY contract is timely, given the evolving dynamics of soybean oil's usage as both cooking oil and feedstock for biofuels. FSOY allows international traders to participate in soybean oil futures trading based on China’s market fundamentals, while simultaneously providing the flexibility to trade crude palm oil futures on the same exchange. This enables traders to seize arbitrage opportunities between the two commonly substituted commodities through spread trading.”
FSOY is a United States Dollar (“USD”)-denominated cash-settled contract, with the Final Settlement Price calculated based on the DCE Soybean Oil Futures Contract’s one-off delivery settlement price on DCE’s 10th trading day of the delivery month. The price is then adjusted for conversion from Renminbi (“CNY”) into USD, and rounded to the nearest USD 0.25. This adjustment allows international traders and exporters of physical soybean products to China to effectively hedge their price risk using the contract.
FSOY is available for trading during Morning and Afternoon Trading Sessions, every Monday to Friday from 9:00 am to 6:00 pm (Malaysia Time). It is also available during After-Hours (T+1) Trading Session, every Monday to Thursday from 9:00 pm to 11:30 pm (Malaysia Time).
For more information about the FSOY contract, visit https://bit.ly/fsoy
