BMD SEES GREATER MAR­KET LIQ­UID­ITY

More in­vestor par­tic­i­pa­tion and new fu­tures con­tracts ex­pected to boost growth

New Straits Times - - Business - AMIR HISYAM RASID bt@me­di­aprima.com.my

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.

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