Bursa Malaysia Derivatives launches first currency futures contract

Bursa Malaysia CEO Datuk Muhamad Umar Swift.

KUALA LUMPUR: Bursa Malaysia Derivatives Bhd (BMD) has launched its first currency futures contract, the Mini USD/CNH Futures (FCNH) through a licensing agreement established with Hong Kong Exchanges and Clearing Ltd (HKEX).

BMD chairman and Bursa Malaysia Bhd chief executive officer Datuk Muhamad Umar Swift said the FCNH contract represents a significant milestone, offering a range of benefits from mitigating counterparty credit risks to providing transparent and regulated trading opportunities.

"It empowers businesses, traders and investors to confidently navigate the currency market, manage risks effectively and unlock growth opportunities, thereby enhancing market liquidity,” he said in his speech at the FCNH launch here, today.

Muhamad Umar said the FCNH establishes a transparent, regulated, and accessible marketplace, benefitting small and medium enterprises and business owners engaged in transactions with China.

This empowers investors to navigate the dynamic currency market with certainty, using FCNH as a valuable tool to hedge risks against US dollar and offshore renminbi fluctuations, ensuring stability in their business operations.

FCNH creates new trading opportunities for hedging renminbi currency risks across different assets, he said.

This smaller-sized cash- settled contract enables seamless trading, allowing investors to capitalise on price differentials and market inefficiencies across multiple exchanges, including Hong Kong and Malaysia's derivatives markets, without full principal exchange or physical delivery.

FCNH also attracts market participants to hedge against currency fluctuations, enhancing market liquidity and promoting the growth of the market ecosystem.

"With a secure and regulated environment, we aim to encourage increased participation from global investors, strengthening the vibrancy and competitiveness of our market,” he said.

The launch FCNH is also strategic and in line with BMD’s recent signing of a licensing agreement with Dalian Commodity Exchange (DCE) on the soybean oil futures settlement price for the Bursa Malaysia DCE Soybean Oil Futures Contract (FSOY), a new product to be listed on the exchange in 2024.

"FCNH will be complementary and serves as a currency hedging tool for market participants interested in trading FSOY, which will be denominated in US dollar, he said.

He said the licensing agreement with HKEX for FCNH and product collaboration with DCE are testaments to BMD’s commitment to forging strategic alliances and deepening global market connections.

BMD is optimistic that these efforts will enable market participants to effectively navigate the complexities of international markets and adeptly manage cross-market risks, he said.

Meanwhile, HKEX vice-president Narendra Hegde said the launch of mini FCNH highlights the close ties between China and Asean.

He said over the years trade between China and Asean has experienced substantial growth, as Asean remains China's largest trading partner on a regional basis, and China has been Asean’s largest trading partner since 2009.

The launch of FCNH will provide investors with a new tool to hedge against currency risk arising from increasing usage of the offshore renminbi, he added.

"The new contract addresses the growing demand among the investors as renminbi has gained significant traction in global markets in recent years.

"And today's launch will contribute to the diverse range of offshore renminbi products,” he said.

FCNH is a cash-settled contract denominated in renminbi and the Final Settlement Price refers to HKEX’s mini-USD/CNH Final Settlement Price.

Market participants can trade FCNH during the Morning and Afternoon Trading Session (9 am to 6 pm Monday to Friday) and the After-Hours (T+1) Trading Session (9 pm to 2.30 am Monday to Thursday). - Bernama

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