PETALING JAYA: Bursa Malaysia Derivatives Bhd has commenced trading of the Bursa Malaysia DCE Soybean Oil Futures (FSOY) contract.
This follows the signing of an agreement between ursa Malaysia Derivatives and Dalian Commodity Exchange (DCE) for the licensing of soybean oil futures settlement price, which was announced last year.
The FSOY contract marks the first non-palm-based edible oil futures contract to be listed on Bursa Malaysia Derivatives, the operator of the world’s most liquid crude palm oil futures contract.
DCE operates the world’s most liquid soybean oil futures contract. The relative prices of palm and soybean oils, the two most widely consumed edible oils, are important for market players particularly food manufacturers, as the oils are frequently used interchangeably as recipe ingredients.
According to Bursa Malaysia Derivatives chairman and Bursa Malaysia Bhd CEO Datuk Muhamad Umar Swift, an important aspect of fostering a more facilitative and competitive marketplace entails expanding its derivatives offerings and establishing cross-exchange collaborations.
“We are pleased to be the first exchange outside of China to be granted licence to incorporate DCE's commodity futures settlement prices into our product offering.
“In addition to our existing futures contracts, market participants can now leverage FSOY as a risk-management tool to hedge against price fluctuations in times of market volatility and evolving complexities of international markets,” he said in a statement today.
Meanwhile, a DCE spokesperson said the launch of FSOY is a pragmatic outcome of cooperation that is in line with the ‘Belt and Road’ initiative and celebrates the 50th anniversary of China-Malaysia diplomatic relations.
“It enriches the tools available for global oils and fats industry chain participants to manage price risks, and strengthens the connections between the two countries' futures markets.
“Moving forward, DCE will continue to explore ways to enhance communication and deepen cooperation with overseas exchanges, steadily increase its level of opening-up, and serve the stable and healthy development of global commodity trade.”
Bursa Malaysia Derivatives director Mohd Saleem Kader Bakas said that the introduction of the contract is timely, given the evolving dynamics of soybean oil's usage as both cooking oil and feedstock for biofuels.
“FSOY allows international traders to participate in soybean oil futures trading based on China’s market fundamentals, while simultaneously providing the flexibility to trade crude palm oil futures on the same exchange. This enables traders to seize arbitrage opportunities between the two commonly substituted commodities through spread trading,” he added.
