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CEO’S MESSAGE AND MANAGEMENT DISCUSSION AND ANALYSIS
DERIVATIVES MARKET
OUTREACH INITIATIVES
Developing the Derivatives Market is a key priority for Bursa Malaysia and we
continued to expand our marketing activities to reach out to more potential market
participants in 2014. Apart from domestic initiatives designed to create greater
awareness of derivative products, we also focused our efforts on recruiting clients from
foreign countries such as India and China through their intermediary brokers based
amongst others in Hong Kong, Singapore and Dubai.These brokers are existing clients
of Chicago Merchantile Exchange, which makes it easy for them to connect and trade
within our existing infrastructure.
Our activities implemented last year to strengthen our Derivatives Market trading
community included the following:
1. Palm and Lauric Oils Conference and Exhibition (POC) 2014
BursaMalaysia’s annual POC conference held annually in Kuala Lumpur,Malaysia
has developed a strong global reputation and is well attended by international
players from the oils and fats industry from over 50 countries. In 2014, POC
marked its Silver Jubilee, celebrating the development of the palm and lauric
oils industry over the last 25 years. The POC continues to lead discussions on
the future of the edible oil industry and provides an excellent base for networking
among its delegates. The event included palm estate visits and a Bursa Malaysia
Derivatives Workshop for more than 2,000 participants.
2. Gold & Precious Metals - Price Outlook Symposium (GOC 2014)
The inaugural GOC2014,themed“Will GoldStill Glitter in 2014?”,was attended by
500 participants. The GOC functioned as a platform to educate retail participants
about the use of gold as an alternative investment asset, and created awareness
about the benefits of trading in the gold futures market over physical gold. We
expect the GOC to drive interest in gold futures on our Derivatives Market and
build an active trading community around this asset class.
3. Derivatives Education and Awareness Programme
We held our annual Derivatives Day in collaboration with six trading partners
to educate the investing public about opportunities available in futures trading.
The programme comprised a full range of sessions related to derivatives trading
including career information for fresh graduates, information on becoming a full-
time trader and information for retirees. As 31% of the trades on the exchange
are transacted by Local participants, there is a need to create a new pipeline of
new Local participants to replace the ones who will be retiring.
4. Local Participants and Incentives
Incentive programmes specially tailored for Local participants were conducted in
2014 to encourage them to trade and hence increase liquidity of newly launched
contracts such as the Refined Bleached and Deodorised (RBD) Palm Olein
Futures Contract (FPOL). Increased liquidity entices more institutions and traders
to participate in these contracts thus creating a greater interest in these products.
As a result of our engagement sessions, we saw 34 new Local participants in the
market in 2014.
ENHANCING OUR MARKET STRUCTURE
In 2014, we revamped derivatives participantship structure into a single trading right.
The revamp replaced the different classes of Preference shares with a single trading
right across all classes of derivatives products thus making the cost of entry as a
Trading Participant cheaper and comparable with regional futures exchanges. As a
result of the revamp, all brokers are now able to offer all products listed on Derivatives
Markets to their clients. On that note, we are pleased to welcome Credit Suisse as our
full-fledged Trading Participant and Clearing Participant.
NEW PRODUCTS FOR THE DERIVATIVES MARKET
In addition to the market enhancements, we recognise the need for us to further
broaden the range of products on offer and we continue to make regular innovations in
this area.A broader range of products will draw greater participation from the investing
public, and help us reach out to a new set of investors both within and outside our
borders in line with our overall strategic plan. We introduced two new derivatives
products in 2014:
1. Refined Bleached and Deodorised (RBD) Palm Olein Futures Contract:
The FPOL contract is a USD denominated palm olein futures contract trading on
our Derivatives Market. FPOL is a complete solution allowing market participants,
particularly refiners and palm olein end users, to manage refining margin risk
and hedge against unfavourable price movements in the crude palm oil and palm
olein markets. The introduction of the FPOL contract is aligned with our ambition
to become the global marketplace and benchmark for all palm oil derivatives.
2. Enhanced Five Year Malaysian Government Securities Futures (FGM5):
The enhanced FGM5 extended the selection of bonds to those with between
four and six years of maturity, and has an extended trading time until 6.00pm.
The enhancement of the FGM5 aims to make our bond-based products more
attractive to retail customers and also to draw new customers to the Exchange.
MOVING FORWARD
On 23 January 2015, Bursa Malaysia Derivatives was granted registration as a Foreign
Board of Trade by the U.S. Commodity Futures Trading Commission (CFTC) pursuant to
Section 4(b)(1) of the Commodity Exchange Act and Part 48 of the CFTC’s regulations.
This permits identifiedmembers and other participants located in the US to enter trades
directly into its electronic order entry and trade matching system on CME’s GLOBEX
trading platform to trade our derivatives products. It augurs well for the Malaysian
derivatives market as it attracts US based Commodity Trading Advisers, hedge funds,
high volume traders and commercials who are actively involved in global trades.
FROM THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Bursa Malaysia
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Annual Report 2014
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