Bursa Malaysia Derivatives today announced that it would raise the margins of its crude palm oil futures contract (FCPO) at the close of business tomorrow to address the recent significant increase in price volatility in the market.

Omar Merican, Chief Operating Officer of Bursa Malaysia Berhad said, "Increasing margins is a common and long-established risk-management mechanism practiced to address price volatility. The market has recently shown a sharp increase in price volatility for FCPO resulting in the need to revise the margin."

He added that the level of initial margin collected by the clearing house must be reasonably sufficient to cover a single day's price movement. Price movements, whether up or down, are a function of trading activity and are not reflective of initial margin levels. The clearing house is not able to control the direction of the market due to the varying of the initial margin.

Steven Lai, President of the Malaysian Futures Brokers Association further added that such increase in margin rates was necessary to safeguard the financial integrity of all participants in the market.

Bursa Malaysia Derivatives Clearing today announced the following Margin rates for its FCPO effective 15 June 2007:

The list above refers to the Initial Margin for all FCPO contracts. Initial Margin is a form of collateral or performance bond that will be returned to investors once all open positions are closed (i.e. net of transaction fees, losses and/or any amounts owing to futures broker).

Volume for FCPO today reached record high, registering 37,231 contracts. The previous record was established at 28,010 contracts achieved on 17 November 2006.