PETALING JAYA: Bursa Malaysia Derivatives Bhd has started trading 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) to license the settlement price for soybean oil futures, which was announced last year.
The FSOY contract is the first non-palm oil edible oil futures contract to be listed on Bursa Malaysia Derivatives, 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 oil, the two most commonly consumed cooking oils, are important to market participants, particularly food manufacturers, because the oils are often used interchangeably as recipe ingredients.
According to Datuk Muhamad Umar Swift, chairman of Bursa Malaysia Derivatives and CEO of Bursa Malaysia Bhd, an important aspect of promoting a simpler and more competitive market is to expand derivatives offerings and establish collaborations across exchanges.
“We are pleased to be the first exchange outside of China to be licensed to integrate DCE’s commodity futures settlement prices into our product offering.
“In addition to our existing futures contracts, market participants can now use FSOY as a risk management tool to hedge against price fluctuations during times of market volatility and the evolving complexity of international markets,” he said in a statement today.
Meanwhile, a DCE spokesperson said the launch of FSOY is a pragmatic result of cooperation, in line with the Belt and Road Initiative and celebrating the 50th anniversary of diplomatic relations between China and Malaysia.
“It enriches the tools available to participants in the global oil and fats industry to manage price risks and strengthens the links between the two countries’ futures markets.”
“In the future, DCE will continue to look for ways to improve communication and deepen cooperation with foreign exchanges, steadily increase the degree of opening-up, and serve the stable and healthy development of global commodity trading.”
Bursa Malaysia Derivatives director Mohd Saleem Kader Bakas said the launch of the contract was timely given the evolving dynamics of soybean oil use as both edible oil and biofuel feedstock.
“FSOY allows international traders to participate in soybean oil futures trading based on Chinese market fundamentals, while providing the flexibility to trade crude palm oil futures on the same exchange. This allows traders to take advantage of arbitrage opportunities between the two commonly substituted commodities through spread trading,” he added.
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