KUALA LUMPUR: The Bursa Malaysia Derivatives Exchange (BMD) is aiming to ramp up participation in its benchmark palm oil contract with the launch of night trading, which traders say will align it with most global markets that run nearly around the clock.
The BMD is set to launch after-hours trading in December for its crude palm oil (CPO) futures contract that is the global benchmark for prices.
“We are one of the few exchanges that do not offer night trading so far. It’s about time that we do align our market practices to our global investors in the correct manner,“ BMD CEO Samuel Ho told Reuters in an interview.
The palm contract trades from 10.30am to 6pm (0230 to 1000 GMT) with a two-hour break starting at 12.30pm The night trading session is set for 9pm to 11.30pm (1300 to 1530 GMT).
That coincides with US exchanges’ opening hours as well as London’s closing hours, Ho said.
Night trading will increase market opportunities for hedgers to effectively manage their risk exposure in volatile markets, especially as commodity price risk exposure is highly impacted by global developments in different time zones, he said.
The Chicago Board of Trade, which runs the benchmark soybean oil contract, has an Asian trading session while China’s Dalian agriculture futures has night trading sessions for several products, including its soybean oil and palm oil contracts.
Global vegetable oil traders are awaiting the launch and said it would offer a better price discovery mechanism.
“Keeping the Bursa Malaysia benchmark palm oil contract open during the US day trading session is helpful for price discovery and risk management,“ said Sandeep Bajoria, CEO at India’s leading vegetable oil broker Sunvin Group in Mumbai.
However, early day trading could suffer, one Singapore-based palm oil trader said.
“People will definitely trade the night session as BMD CPO is a very liquid market...but we might see lower volumes the next morning as some market participants would have covered at night.”
Paramalingam Supramaniam, director at Malaysia-based brokerage Pelindung Bestari said, “with the night trading we can be more than an observer and hedge our risks.”
