Where To Trade Futures Crude Palm Oil In US Dollar

Today I come across a local newspaper headline tagged as "US Dollar Crude Palm Oil Futures (FUPO) In For Exciting Debut". So I did a google search on this topic and the results indicated that there was hardly any mention or coverage about this so called "exciting debut"! Incidentally, i found out that today (Friday) marks the first day of listing! Talk about best kept "secret", Malaysia sure knows best! Where are the promotions and publicity? I doubt if even a handful of people knew about this! Or may be it is meant for foreigners only, after all it is to be traded in US Dollars?

Whatever that is, the availability of such mechanism makes sense, as US Dollar is a global denomination whereas Malaysian Ringgit is still not tradeable offshore. So it is a lot more convenient for traders as they need not convert USD to Ringgit and subject themselves to foreign exchange risk.

Before this, crude palm oil futures can only be traded in Ringgit denomination in Malaysia. Malaysia is presently the second largest crude palm oil exporter in the world after Indonesia.

Stock exchange regulator Bursa Malaysia has apparently engaged several market makers to ensure encouraging trades on the FUPO. Market makers are usually brokerages and banks that accept risks by quoting both buy and sell prices in futures contracts, hoping to make a profit on the turn or the bid/offer spread.

The contract unit will be 10 tonne and the minimum price fluctuation will be USD 0.25 per metric tonne. Daily price limit is 10% above or below the settlement prices of the preceding business day.

Speculative position limit will be 500 contracts net long or net short for spot month, 5,000 contracts for any single contracts except for the spot month and 8,000 contracts for all contracts months combined.

This is a cash settled contract which does not involve physical delivery of the underlying CPO. Trading can be done via the direct market access, a supposedly zero-touch electronic trading solution that enables real-time execution of trade orders. Big foreign institutions can bypass a dealer to key in orders themselves and thus, pay less brokerage fees.

For more information on FUPO, click this link posted in Bursa Malaysia.

For more independent reviews, check out this blog posted by S Dali.