Development of Derivative Market in Malaysia

In December 2012, Bursa Malaysia stated that Crude Palm Oil Futures Open Interest rose significantly from the year 2010 to the year 2011 and has reached over 150,000 contracts. In my opinion, I believe that Malaysian investors has improved in terms of their confidence level in the derivative market that was built at domestic level and internationally. Moreover, the investors especially corporate treasurers, commodity farmers, bankers and equity portfolio managers are wiser in managing their risks against price volatility in the market. Therefore, introduction of options on crude palm oil futures provides ways to offset risk and at the same time enhance gain in trading regardless of the market being bullish or bearish. Furthermore, development in the derivatives market indicates that people are more aware and more knowledgeable in derivatives instruments than before.

The launch of new clearing and settlement system shows that Malaysian derivatives market has evolved to be more systematic and efficient in processing the exercise tradings. Besides providing more exposure than buying single stocks, futures and options provides leverage in terms of margin. Leveraging allows traders to control an asset of greater value than the initial investment.

In short, the development of derivatives market in Malaysia has proven that we have emerged to become more competitive at domestic level and globally. Thus, the transparency and efficiency of our derivative market would attract more foreign and local traders to participate in the derivatives market, allowing it to evolve from time to time.

Reference

Grant, J. (2012). Quick view: Malaysia derivatives shine. The Financial Times, http://www.ft.com/cms/s/0/de3754a8-b9b4-11e1-b4d6-00144feabdc0.html

Bursa Malaysia. (2012). BMD palm oil futures (FCPO) open interest surpasses 150,000 contracts for the first time. Bursa Malaysia Berhad http://www.bursamalaysia.com/market/derivatives/about-bursa-malaysia...