INTERNATIONAL – The Bursa Malaysia Derivatives Exchange (BMD), renowned as a leading platform for crude palm oil futures, is set to launch a soyoil futures contract on March 18. This initiative aims to facilitate arbitrage between soyoil and palm oil contracts, according to BMD Chairperson Abdul Wahid Omar at an industry conference on Tuesday.
This marks the first non-palm-based edible oil futures contract to be introduced on Bursa Malaysia Derivatives, made possible through a collaboration with the Dalian Commodity Exchange (DCE).
“The soyoil contract will enable market participants to seamlessly arbitrage between soybean oil and palm oil prices on the same platform,” said Abdul Wahid Omar.
The BMD will adopt the settlement price of DCE’s soyoil futures contract as the benchmark for determining the settlement price of its new US dollar-denominated soyoil futures.
Price trends in palm oil, soyoil, sunflower oil, and rapeseed oil are interdependent, influenced by the movements of other competing edible oils.
Price trends in palm oil, soyoil, sunflower oil, and rapeseed oil are interdependent, influenced by the movements of other competing edible oils. Currently, traders and refiners hedge their risks across multiple edible oils using different exchange platforms.
The Chicago Mercantile Exchange (CME), which merged with the Chicago Board of Trade (CBOT), offers one of the most liquid soyoil futures contracts widely used as a global benchmark.
While the new BMD soyoil contract is promising, attracting significant participation may prove challenging due to the existing popularity of soyoil futures offered by CBOT and DCE. “The new contract must attract considerable participation and liquidity to encourage more trading activity,” noted a Mumbai-based trader from a global trading house.
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On a positive note, Abdul Wahid Omar expressed optimism about Malaysian palm oil prices improving in 2024, driven by strong demand from key markets. However, he also cautioned market participants to remain vigilant against potential challenges.
With this innovative launch, Bursa Malaysia Derivatives aims to strengthen its position as a leading platform for global edible oil trading.
