Bursa Malaysia Derivatives Berhad (Bursa Malaysia Derivatives) will very soon be launching its first currency futures contract, the Mini USD/CNH Futures (FCNH) through a licensing agreement established with Hong Kong Exchanges and Clearing (HKEX.
The upcoming launch of FCNH on 11 December 2023 is a significant stride in the advancement of the Malaysian capital market as it will be the country’s inaugural exchange traded currency futures contract, complementing existing currency markets operated by Malaysian financial institutions. An exchange-traded currency futures contract can help mitigate counterparty credit risks, as well as provide a transparent, regulated and easily accessible marketplace.
With the introduction of the new asset class within Bursa Malaysia Derivatives’ offerings, traders will be presented with enhanced trading opportunities and arbitrage possibilities across the derivatives markets of Hong Kong and Malaysia.
Designed as a smaller-sized, cash settled contract, FCNH offers investors a capital-efficient way to achieve RMB currency hedging over their investment holdings since it does not require investors to exchange the initial sum invested.
This will be very useful for participants, such as small to medium enterprises (“SMEs”) and business owners with transactions in China, to hedge their risks on fluctuations in the US Dollar and offshore Chinese Renminbi (RMB) currencies.
The plan to launch FCNH is also strategic and in line with the Exchange’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 Bursa Malaysia Derivatives in 2024. FCNH will be complementary and serve as a currency hedging tool for market participants interested in trading FSOY, which will be denominated in USD.
“The launch of FCNH is timely given the current volatility in global markets, which has led to increasing demand among market participants and businesses to manage their foreign currency exchange exposure,” said Datuk Muhamad Umar Swift, Chairman of Bursa Malaysia Derivatives and Chief Executive Officer of Bursa Malaysia Berhad.
“Our licensing agreement with HKEX for FCNH and product collaboration with DCE are testaments to Bursa Malaysia Derivatives’ commitment to forging strategic alliances and deepening global market connections. We are optimistic that these efforts will enable market participants to effectively navigate the complexities of international markets and adeptly manage cross market risks.”
HKEX Group Head of Emerging Business & FIC, Glenda So, said, “We are pleased to be working together with Bursa Malaysia Derivatives for the launch of its Mini USD/CNH Futures. At HKEX, building a suite of RMB-related investment and risk management products forms a key part of our strategy, and we are keen to support our partners with the development of a broader RMB and fixed-income product ecosystem in the region and beyond, connecting capital with opportunities.”
FCNH is a cash-settled contract denominated in RMB. 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 (9:00 a.m. to 6:00 p.m. Malaysia Time, Monday to Friday) and the After-Hours (T+1) Trading Session (9:00 p.m. to 2:30 a.m. Malaysia Time, Monday to Thursday).
To learn more about trading opportunities with FCNH, the public is invited to log onto the live stream of the FCNH launch at Bursa Malaysia’s Facebook page on 11 December 2023, at 9:00 a.m. The event will include presentations and a panel discussion on ‘Navigating the Path to Diversification in Currency Trading: Challenges, Opportunities, and the Evolving Role of RMB.’
