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Dato’ Yusli Mohd Yusoff, CEO of Bursa Malaysia Berhad, said, “The wide appeal of our Ringgit-denominated crude palm oil futures contract (FCPO) has spurred us to expand our offerings in the derivatives market with products such as FUPO. This new derivatives product not only provides an opportunity for us to further globalise our futures market but also positions Bursa Malaysia as an internationally competitive marketplace for futures trading.”
FUPO is a cash settled contract that uses FCPO’s settlement price. Bank Negara’s currency exchange rate will be used in calculating the Final Settlement Value which will add transparency to the price.
“The introduction of FUPO is part of the exchange’s plan to grow the derivatives market for 2008. Looking at the success of FCPO which traded 2.8 million contracts for the year ended 31 December 2007, we are optimistic that FUPO will attract new contracts to be traded and increase more market players in the palm oil derivatives market,” Dato’ Yusli added.
With FUPO, current local and CPO traders will have additional opportunities to trade in USD and arbitrage between FCPO and FUPO. In addition, FUPO will be useful for traders interested in foreign funds, commodity funds as well as hedge funds, as they will be able to maximise on price discrepancies between commodities, markets, delivery dates and locations.
Potentially bio-fuel producers and users, shipping and freight companies, food manufacturers and restaurant chains, as well as commercial banks, can benefit from FUPO as they will be able to hedge prices of raw materials, palm oil shipment, cooking oil price and commercial loans.
FCPO on Bursa Malaysia is widely regarded as the global benchmark for palm oil prices, and has attracted strong interest from foreign investors, including hedge funds over the past year. Dato’ Yusli added, “Looking at the sustained demand and strong performance by palm oil-based companies, I am optimistic of FUPO’s potential due to its strong, attractive features, and its leverage from the popular FCPO.”
FUPO Contract Specifications:
| Contract Code | FUPO |
|---|---|
| Settlement Methodology | Cash settled |
| Contract Unit | 25 metric tons |
| Minimum Price Fluctuation | USD 0.25 per metric ton |
| Contract Months | Spot month and the next 5 succeeding months, and thereafter, alternate months up to 24 month ahead |
| Trading Hours | First Trading Session: Second Trading Session: |
| Final Trading Day | Contract expires at noon on the 15th day of the spot month, or if the 15th is a non-market day, the preceding business day |
| Final Settlement | Cash settlement based on Final Settlement Value |
