Bursa Malaysia Derivatives Exchange (BMD), the world’s leading exchange for crude palm oil futures, will launch a soyoil futures contract on March 18 to facilitate arbitrage between soyoil and palm oil contracts, its chairperson said at an industry conference on Tuesday.
This would be the first non-palm based edible oil futures to be listed on Malaysia Bursa Derivatives, said Abdul Wahid Omar, after an agreement with Dalian Commodity Exchange (DCE).
“Soyoil contract will enable market participants to seamlessly arbitrage between soybean oil and palm oil prices on the same platform,” he said.
The BMD will use the settlement price of the soyoil futures contract on the DCE as the basis for calculating the settlement price for its new U.S. dollar-denominated soyoil futures, he added.
Price movements in palm oil, soyoil, sunflower oil and rapeseed oil depend on the price trends of other competing edible oils.
Currently, traders and refiners hedge their risk in various edible oils on different exchange platforms.
Currently, Chicago Mercantile Exchange (CME Group), which merged with the Chicago Board of Trade (CBOT), offers one of the most liquid soyoil futures contract that is used by the industry as a benchmark.
The BMD’s new soyoil contract appears attractive, but it may not be easy for BMD to garner large participation due to the already very active existing soyoil contracts offered by CBOT and DCE, said a Mumbai-based dealer with a global trade house.
“The new contract needs to bring a lot of participation and liquidity, which will eventually attract more people to trade the contract,” the dealer said.
Meanwhile, Omar also said Malaysian palm oil prices are expected to improve in 2024, helped by heightened demand from key markets, but warned that market participants should remain vigilant of possible challenges.
Reuters
