BMD SEES GREATER MARKET LIQUIDITY
More investor participation and new futures contracts expected to boost growth
BURSA Malaysia Derivatives Bhd (BMD) expects higher liquidity in the derivatives market from the growing participation of traders and more new futures contracts.
Chief executive officer Jamaluddin Nor Mohamad said higher volatility and lingering uncertainty in the stock market have pushed investors to look at hedging as a way to manage risks.
“These investors look at our derivatives, like futures and options, for hedging purposes to manage risks. We expect the high level of participation in the market to continue. From the current price volatility perspective, they will need to continue to manage risks.
“While derivatives are more skewed towards institutional investors, which are very much involved in day-to-day business of an underlying product, we will see growing participation among retail investors as they see it as an alternative investment,” he said in an interview recently.
Industry observers said the local derivatives market will be driven by crude palm oil (CPO) futures and equity index contracts such as FTSE Bursa Malaysia KLCI (FBM KLCI) futures.
In 2015, CPO futures accounted for 82 per cent, or 11 million contracts, of the total 14.1 million futures contracts, followed by FBM KLCI futures (16 per cent) and others (two per cent).
Last year, 11.4 million CPO futures contracts were traded. In 2010, the total futures contracts stood at six million.
Jamaluddin said in the past, the market had seen positive growth participation year-onyear for various contracts.
New contracts which will be introduced by the exchange, in addition to recently-introduced contracts, such as gold and tin, will attract new participation in the derivatives market and increase the liquidity level.
“From the capital market perspective, we will need various types of instruments and tools to facilitate the industry’s needs. Their needs are product-based and dependable on various factors. Bursa Malaysia will put more contracts in the marketplace to meet these needs to complement new real and underlying products.”
Jamaluddin said liquidity in the market is a safeguard against stock manipulation and market panic.
“This is what we do. We identify unusual market liquidity conditions and avoid investments that are particularly vulnerable to sudden liquidity shifts.”
BMD was established in 1993 and is a subsidiary of Bursa Malaysia Bhd. It provides, operates and maintains equity, interest rates, bond, agricultural commodity, metal commodities futures and options market trading and settlement services.
BMD’s products are available on the CME Globex electronic trading platform.
Bursa Malaysia will put more contracts in the marketplace to meet these needs to complement new real and underlying products.
Industry observers say the derivatives market will be driven by crude palm oil futures and equity index contracts such as FTSE Bursa Malaysia KLCI futures.