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THE GLOBAL DERIVATIVES MAGAZINE ROUNDTABLE

Malaysia derivatives
Global access through a global partner
Held on September 18, 2012 in Singapore

In association with
2 OCTOBER/NOVEMBER 2012

THE FOW ASIA ROUNDTABLES: BURSA MALAYSIA DERIVATIVES


Sponsored by:
VIP invite
Date: 18 September
Time: 14:45 (15:00 start)

an Bursa Malaysia
Derivatives: Derivatives Location: Marina Mandarin,
Singapore

targets
ccess international
through growth
a Global Partner
s mostAs established
exciting markets in The
growth markets thepanellists
West falter, investors are increasingly looking overseas for
will be:
Bursa Malaysia Derivatives (BMD)
trading opportunities. After
and 2011 following a deal with
a decade
Chong of CEO,
Kim Seng, growth
Bursa and a landmark
Malaysia Derivatives deal with the CME Group

in 2009,
e exchange Bursa
to Globex Malaysia Derivatives is targeting diversificationCommission
traders. Goh Ching Yin, ED Strategy & Devt, Securities and increasing its growing
Shamsuddin bin Mohd Mahayidin, Director of Foreign Exchange
international participation.
its markets to foreign investors and
At the Asia Roundtables, held on September 18, William Mitting
Administration Department, Bank Negara Malaysia
ith newmet with
contract a group
launches, moreof leading market
Natarajan participants
Narayanasamy, in theDirector,
Executive Malaysian market to discuss the
present themselves for international
development of the exchange and the potential for growth as it seeks CFTC approval for DMA.
LT International Futures (M) Sdn Bhd
Azila Abdul Aziz, Executive Director Dealing,
Kenanga Deutsche Futures Sdn Bhd
Speakers
MD will host an exclusive
Derivatives: Global Access through Steven Lai Choon Lim, Director, OSK Investment Bank Bhd
ts only, this is your opportunity Paul Davies, Managing Director, Goldman Sachs
rts talk about the opportunities in
pitalise on them. David Strachan, Managing Director, J.P. Morgan
Julien Le Noble, Managing Director, CME Asia
amine the challenges William Mitting, Editor, FOW
alaysia for international
can capitalise on the
The roundtable will be available for download from
Chairman: Moderator: Azila Abdul Aziz, Teyu Che Chern,
http://www.fow.com/Stub/SponsoredRoundtable.html Steven Lai Choon
Chong Kim Seng, William Mitting, executive director chief executive, Lim, director, OSK
chief executive, editor and publisher, dealing, Kenanga Phillip Futures Investment Bank
, contact Helen
Bursa MalaysiaSeidenberg
FOWat hseidenberg@fow.com
Deutsche Futuresor + 44 207 779 8351
Derivatives
vents.com

Julien LeNoble, Shamsuddin bin Natarajan David Strachan,


managing director, Mohd Mahayidin, Narayanasamy, managing director,
CME Asia director of foreign executive director, JPMorgan
exchange Bank LT International
Negara Malaysia

William Mitting, FOW: I think it goes without saying really begun to attract international attention on a
that Malaysia is one of the most exciting derivative greater scale than before. To begin, Mr Chong, can
markets globally right now. At a time when volumes you give us a little background to the growth of the
are in decline on a number of Western exchanges, Malaysian markets and the economic growth within
its more important than ever that international Malaysia itself?
investors can grow in new markets. Bursa Malaysia
Derivatives has been growing for some time now, Chong Kim Seng, Bursa Malaysia Derivatives: In
but it is over the past 12 to 18 months that its 2010, the Malaysian Government launched a large
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THE FOW ASIA ROUNDTABLES: BURSA MALAYSIA DERIVATIVES

programme called the Economic Transformation discovery and hedging across markets, and even
Programme, or ETP, which targets investment talks about moving it from the underlying physical
in high growth areas in order to improve the market to the derivatives market because of cost
infrastructure and to boost competitiveness efficiencies and flexibilities for hedging. So having
and efficiency. Also within the programme a well-regulated derivatives market becomes an
are measures to divest government stakes in essential part of the overall picture.
companies to private investors as part of the In the year 2000, the notional value of
overall goal of growing Malaysia from its developing derivatives in Malaysia stood at MYR 84 billion. By
country status to a high income economy. It is 2010 that value went up to MYR 512 billion, which
now up to various agencies and industry sectors is a 500% increase. Its projected that by 2020
to execute this plan. So, overall Malaysia is that value will be MYR4.1 trillion, another 800% or
undergoing a very, very exciting growth phase, so over 2010. That is the projected growth in the
expected between now and 2020. derivatives markets.
The development of the capital market in the We are all very encouraged by the support that Chong: rapid growth at BMD
financial services sector is also contained within we have received from Securities Commission and
the ETP programme and the development of the [the central bank] Bank Negara as we go about
derivatives marketplace is a key growth area within developing this market. So that is the framework
capital markets. we are operating our business under, and Im glad
In 2009 Bursa Malaysia formed Bursa Malaysia that that framework is very consistent with how we
Derivatives, a 75:25 joint venture with the CME are looking to move forward.
Group. In 2010, we concentrated on migrating
all our products onto the CMEs Globex platform, Mitting: Shamsuddin, from the central banks
a process that we completed successfully by perspective, are there any restrictions on the
September 2010. In 2011, we worked on mobility of cross-border fund flows arising from
developing the derivatives clearing side of the foreign investments in the country?
business, launching a new clearing engine in
February 2012. Shamsuddin bin Mohd Mahayidin, Bank Negara
2012 is our first year of our market Malaysia: Our policy, our role and our aim is
development, where many new services and new to create an environment that is conducive for
products are being introduced and launched, business, and also to enhance the competitiveness
new services include negotiated large trades of the economy, while promoting monetary and
and exchange futures for related positions; new financial stability. We are creating a welcoming
products include the re-launching of interest rate environment for businesses. We are creating an
products, options on the stock index, and options environment where people can compete.
on the palm oil futures contract. All of these As far as non-resident foreign investment is
initiatives are laying down the foundation for future concerned, theres free mobility of capital moving
growth, and we believe that theres going to be into Malaysia and out of Malaysia, there are no
great traction. restrictions whatsoever when it comes to money
Between 2010 and 2011 the exchange grew by coming in for investment and money going out
39%, out of which palm oil futures grew by 46%, arising from investment. Foreign investors can
and the futures on the Kuala Lumpur Composite recover profits and recover dividends. Investors are
Index grew by 26%, so we are encouraged by this. free to pick up the money: there are no restrictions.

Mitting: There has been a lot more international Mitting: Malaysia recently has been undertaking the Theres free
interest but I know one hesitation a lot of investors liberalisation of foreign exchange administration. mobility of
have going into new markets is uncertainty over the However, it does seem that there are still
regulatory framework. Could you just provide a little perceptions in the market that there were capital capital moving
background to that: how its changed and how open controls. What are the common misconceptions
the market is? that you come up against and whats your answer
into Malaysia
to them? and out of
Chong: Our regulator is the Securities Commission,
which issued a Capital Masterplan II in 2011. It Mahayidin: Controls were imposed way back, more Malaysia,
builds on the first plan that ended in 2010. The than ten years ago, as part of a plan during the
update to the Capital Masterplan, which runs up financial crisis and were removed soon afterwards.
there are no
till 2020, outlines various strategies to bring about However, there are still some misconceptions. restrictions
growth and increased governance in the capital The misconception that we normally hear is that
markets. there are restrictions for people who want to whatsoever
It is interesting to note that the Plan talks invest in Malaysia, that there are levies imposed Shamsuddin bin Mohd
specifically about facilitating the efficiency of price on investment initiatives. This is not true at all. The Mahayidin
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THE FOW ASIA ROUNDTABLES: BURSA MALAYSIA DERIVATIVES

perception is that there are still rules pertaining to Secondly, the trading desk of the global client
mobility of capital, and Id like to make it very clear must ensure that the system and the front-end
that we do not have such rules anymore. trading application that they deploy is CME certified.
Finally, the trading desk of the global client must
Mitting: That must be music to the ears of your establish trading platform connectivity and ensure
clients, David. But are there other challenges to that their trading infrastructure is able to interface
trading in Malaysia? Where do you see the key with CME Globex and communicate via FIX/FAST
stumbling blocks, and how do you help your clients protocol. With those three steps you can get
overcome them? connected.

David Strachan, JPMorgan: Yes, that certainly Julien LeNoble, CME Group Asia: Going back to the
is music to our ears, and has been for some perception of potential restrictions surrounding
time. With respect to the other challenges that access to the Malaysian market, does the panel
Aziz: how to access BMD international investors face, I would say that the have a sense of whether this perception is a barrier
sophisticated investors have already found ways to to participation for some? Is there really some
negotiate any challenges. liquidity that is not accessing simply because they
There has also been to a certain degree have a perception of barriers that dont exist and
an apprehension around holding deposits or therefore do not come into the market?
having assets in the Malaysian ringgit due to the
volatility of the currency, but if you look back at Natarajan Narayanasamy, LT International Futures:
the Malaysian ringgit over the course of the last I think capital controls were a barrier, but we
24 to 30 months, its moved within a very tight dismantled it. We got to the point and said, hey,
band between 3 and 3.2 against the US dollar, so this is never going to work, and I think we have
in terms of global volatility this is actually not a made it very clear to the whole world that these
volatile currency. barriers are not in existence anymore and when
So we dont feel there are any major challenges the exchange tied up with CME that made the point
for sophisticated international investors finding a event more.
way to access this exchange, and weve seen that
most notably by the number of new clients that Strachan: Thats absolutely spot-on. We used to
weve brought to Malaysia over the course of the have clients coming to us and saying we want to
last two and a half years. trade on Bursa Malaysia, and then wed outline the
ringgit denomination, wed outline the convertibility,
Mitting: So there are no major challenges, but, wed outline the processes that we had in place.
Azila, there are requirements that investors need Wed outline the issues which used to exist around
to be aware of. Can you just outline those? things like give-up agreements, which were quite
complex at some stage. And then theyd say, well,
Azila Abdul Aziz, Kenanga Deutsche Futures: I would thats a bit too complicated, well find something
say that from the micro perspective brokers remain else to trade.
the key source of access to the markets. There is That has changed. I dont believe were missing
a little bit of confusion sometimes when we talk to out on a large pool of liquidity. I think that 80% of
new customers, especially on the global side about the clients that want to trade Bursa Malaysia are
access. already trading it; the other 20% are probably going
We dont With contracts being made available on the to be in the next 12 months.
feel there are CME Globex platform, clients ask if they can access
it via their existing relationships on the current Mitting: Julien, while were talking about the Globex
any major platform that they have in America or in Europe. tie-up, the 25% investment is higher than you
This is not the case, because prior to having the typically invest in your global partners; what was the
challenges for trading access into BMD listed products hosted on rationale behind the investment in Bursa Malaysia?
sophisticated CME Globex, the institutional global customermust How do you see that deal developing and how do you
establish a relationship with a clearing broker work with the exchange?
international onshore in order to comply with the Bursa Malaysia
Derivatives business rules. Le Noble: Partnerships are really an integral part
investors There are about 20 member firms on BMD and of our international growth strategy. Its in our DNA
finding a way getting connected is a straightforward process, and goes back 24 years ago when we started our
just pick a broker of your choice and establish that partnership with the Osaka Stock Exchange. Since
to access this relationship. If the institutional global customer is then, we have established a number of partnerships
using a carrying broker, that carrying broker must with or without a shareholding component with
exchange have a direct relationship with a BMD clearing the latest being our recapitalisation of the Dubai
David Strachan member firm. Mercantile Exchange.
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The rationale is really linked to our drive to have diversification in their portfolio. None of that
provide access to benchmark products to our has changed, and palm oil is still a very popular
clients, and this is the underlying factor that we contract with CTAs. But CTAs have had a very
look at when we consider partnerships. tough trading time over the course of the last two
Bursa Malaysia had the palm oil benchmark years, and many of those losses seem to have been
before we got involved and it obviously remains concentrated in commodity contracts, so I think we
a global benchmark. It is a large producer of the might have actually seen a little bit of risk off from
commodity with 85% of global production coming the CTAs.
from Indonesia and Malaysia, and a platform where
refineries, producers, and the rest can come to Teyu Che Chern, Phillip Futures: We are seeing
manage their risks. more investment coming from North Asia. There
The partnership is not just about Globex, our are more people arbitraging the Dalian versus the
electronic trading platform. The other attribute Malaysia palm oil contract, and also looking at the
Narayanasamy: HFT an
is the fact that we have a 25% ownership stake, soya bean versus Malaysia palm oil.
opportunity
and that is important because it creates a vested One of the key benefits of trading on Globex is very
interest for us to work very closely with Bursa much the increase in international participation. As
Malaysia Derivatives, not just making sure that long as traders are connected to CME, they can
the Globex platform is operational and reliable, but straightaway connect with someone in Asia.
also in ensuring that we are closely cooperating
with regards to product development, research and Chong: If you look at our performance over the few
marketing and sales activity. So we are fully vested years before we went on Globex, we stagnated
partners, and thats an essential attribute to the at about 6 million contracts for four years, and
partnership. then we have this 39% growth that came the
moment we went to Globex. We recognise that
Mitting: And in terms of the types of investors that global electronic distribution is a critical part of the
youre working with to access Malaysia Azila, can business, and we are glad that we have solved that
you give us a brief demographic of your clients? challenge through the Globex engine.

Aziz: I think you can break it down into four broad Mitting: Obviously the palm oil contract is the most
categories. First of all, we see foreign banks, liquid on the exchange, but in terms of international
hedge funds and CTAs, which account for 25% interest in other areas, what are you seeing David?
and 50% in the two most active contracts crude
palm oil futures and index futures respectively. Strachan: I think one of the mistakes that
Second of all, the speculators which includes many exchanges have made in the past in Asia is they try
local traders. The third category is the rising to fix a contract which doesnt have any problems.
participation from high frequency trading firms Weve seen that many times, and I dont know
running quantitative-base arbitrage strategies, whether this is just an Asian-specific or a global
which have been adding liquidity to the market. And problem, but when we look at the BMD palm oil
fourth, the domestic corporate end users, such as contract, we dont see anything fundamentally
manufacturers and large plantation companies are wrong with it and the interest from our clients,
maintaining a stable level of hedging activity. supports that view. There are
Strachan: I think that the strongest growth that
Are there issues which could be attended to?
Of course there are. Take the closing auction, for
more people
weve seen has been among the trade participants, example, there are some issues around the security arbitraging the
and thats to a large extent because theyve been of the warrants procedure during the deliveries, but
able to trade more because volume begets volume, these are asides rather than fundamental issues Dalian versus
and as the market itself expands they find more
liquidity to get the size of the hedging done that
that need to be fixed. So our advice would be if its
not broken then dont try and fix it.
the Malaysia
they want to do. That then feeds into greater With respect to other markets, weve had very palm oil
physical activity, which then of course requires the little interest in a ringgit-dollar FX contract, but
exposure for the larger hedges. typically thats the case until the contract is actually contract, and
The exchange has been very commercial in the there, until an exchange has the courage to launch also looking at
way that theyve viewed requests that weve made the contract.
on behalf of clients for hedge extensions, which has If you look at the Indian exchanges that have the soya bean
seen additional growth there. I think if any sector launched FX futures recently in Mumbai, there was
of the market has gone the other way its possibly very little client demand for that, but the contract
versus Malaysia
been the CTA market. itself has been very successful, so the fact that the palm oil
Everyone knows that palm oil is a non-correlated client demand isnt there doesnt necessarily make
contract, and CTAs by their very nature need to any statement about its potential success. Teyu Che Chern
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Mitting: Which brings us on to the domestic Mitting: We have talked quite a lot about the
market. Steven, could provide a brief outline of your international investment coming into Malaysia, but
overview of the key trends among local investors one of the opportunities presented by the Globex
and the key growth areas that you identify? deal is greater ability for local traders to trade out
of Malaysia. What trends are you seeing; where
Steven Lai Choon Lim, Director, OSK Investment are locals trading and what growth do you see
Bank: Perhaps maybe I will share the market internationally in that respect?
demography of our marketplace. For the local
index futures, for the last three months, domestic Che Chern: What we have seen is a migration to
participant is around 40%. That tends to fluctuate international markets. Local traders who have
between 40% and 50% depending on the short- learnt to arbitrate futures on indexes want to
term volatility that we experience. There are a lot explore a bit more. So we see that they start
of short-term traders in the retail market. For the looking at other Asian markets, and one way to
Che Chern: international palm oil, the retail participation is about 20% of start that is on the SiMSCI in Singapore and then
migration the daily volume, total domestic participation is maybe the Hang Seng. After a while they look at
around 58% including exchange locals, and that Dow Jones and the S&P, because thats where the
tends to range from 55% to 60%. liquidity is. Then you also see commodity traders
So we feel retail participation in Malaysia is will try other commodities like a gold contract or a
quite healthy and it is growing. But of course crude oil contract. So there is another opportunity
theres a lot more work to be done in terms of for Bursa Malaysia Derivatives: maybe it can
education and growing investor sophistication in launch a gold contract locally.
tandem with the marketplace.
Mitting: Moving on to high-frequency trading on
Mitting: There has been quite an intense educational the Malaysian markets. Can you just give us a
programme across Malaysia thats been conducted quick overview of how much HFT there currently
by the exchange in coordination with local brokers. is?
Could you just outline how youve been road-showing
the exchange and what impact thats had? Narayanasamy: Our estimations suggest that HFT
accounts for approximately 4% to 5%, of overall
Chong: From the exchanges point of view we market volume so it is not that big at the moment.
recognise that we need a strong domestic And as far as HFT is concerned, I think its
market as well as the international market. On something very new for BMD. We saw HFT come
the domestic side, education is a key part of our into the market after the Globex deal and there are
growth strategy. As an exchange, together with various brokers offering that right now but at the
our broking members, we educate the market on moment theyre not that robust in the market. We
hedging, trading, risk management, how to use dont see big volume there at the moment but it is
futures, how to use options: all subjects that need growing.
to be brought to the attention of the domestic Of course theres the issue of the regulators
market participants, including going to the board now coming down quite hard on some of these
members of some of the institutional plantation HFTs and asking how it should be regulated. As far
companies. as Malaysias concerned, I think at the moment,
BMD regulates it indirectly through the brokers.
Che Chern: The exchange is taking the lead, So what we are seeing is still new, but what
travelling to different parts of Malaysia, and we are trying to do is take it to the next step, like
bringing brokers together and activating new options. And they just want to get a feel of the
brokers. It promotes broking as a career as well market and find the liquidity.
as the basics of trading futures. At least to 20 to But when these guys really come out in full
30 new Local Participants have been activated as a force then well probably see the underlying futures
result of this campaign. It takes a while to see the and the options taking off. And this is where we
result of all these programmes but the impact is go looking at volumes of 100,000. So this is
As far as HFT already being felt. something good for the market at the moment, but
is concerned, Chong: I think as we go about doing all this, there
this is not what we rely on.

I think its is a group of very seasoned traders across the Mitting: Presumably BMD is naturally quite an
world who are very willing to teach other traders. attractive market to HFT, because of the arbitrage
something very This discussion is definitely welcomed in Malaysia. opportunities in other markets. How has that been
new for BMD I think that when you go out there, you see there developing?
is a huge demand for education and providing this
Natarajan Narayanasamy education could be a very successful business. Che Chern: We know there are people that are
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spreading between soya beans on Chinese and got exchange-hosted pre-trade risk management
Malaysian markets. That could be manual trading procedures in place, implemented, and live, they
though and the question is whether it is going to have a level playing field, so its not so attractive
cross into algo trading but there are structured for HFT.
programmes and its probably already happening. What the high-frequency traders want is an
At the moment they have the API connectivity and exchange that will allow them naked access, so
they are able to write an algo. But certainly based effectively using a broker-sponsored API to divert
on our understanding the demand is there, and around the risk management procedures, which
as more and more people look at Malaysia, this might save them a couple of nanoseconds or
portion of algo trading will certainly grow. picoseconds, and so they get the advantage over
their competitors in this technological arms race.
Narayanasamy: I think if we look at the whole So for that reason, Im not convinced that BMD
macro perspective of the industry, its all about will see the same take-up of high-frequency trading,
Strachan: Technology arms
technology. Its a technology-driven business now because it is, as it should be, a level playing field
race
right from the US to Asia. giving fair access to all.
Technology was something that everybody
feared ten or 15 years ago. But now it has grown Mitting: I am sure that we could talk for another
to something that you fear being without, so 90 minutes about the HFT debate but I want to
everybodys moving in a different direction now. I move on to look at the future growth of BMD.
think thats whats happening to our market and to Traditionally, obviously, the palm oil contract has
our industry globally. been dominant but you said that a goal of the
exchange is to diversify with initiatives such as the
Mitting: Whats the exchanges take on HFT, how do launch of options. Where do you see the key growth
you view it as a growth area? areas outside palm oil for the exchange?

Chong: I think our starting point is that the market Chong: Our view is that so far the volume is
belongs to everybody. In a market there are many good, but its not excellent and there is still a lot
buyers and sellers. Its not just a domestic market. of room to grow our existing futures contracts.
It is an international market. We see high-frequency We introduced options in response to requests
traders as part of the business and the market and from the market. At the end of the day its about
we welcome them. And since the Globex engine can increasing hedging flexibilities and, once we
take care of them as well, we see them just like any have made the product available, its up to the
other trader, and we welcome their participation. market participants to take it forward and create
strategies around them to manage the price risk.
Mitting: And what is the local attitude to high We want to expand into more commodity
frequency trading - has the negativity in the West derivatives, and in that respect we are talking to
clouded its perception? various physical trade boards. We are an asset
management centre and as an asset management
Strachan: I think that we are involved in a centre we need to have the instruments available
technology arms race, and if you look at the trends to ensure that the funds can move around and
that weve seen over the past years, typically the stay in the country and need not leave to trade
emergence of new technology and new products in on other markets because you dont have certain
Europe and the US have then emerged in Asia. On instruments that they need.
the subject of high frequency trading, JP Morgan We cannot forget equities, bonds, interest
has somewhat of a different perspective on this. rates, and of course at some point in time the
Were particularly concerned about high- currency space. We are working on various sectors
frequency trading because of the potential risk
management implications. Weve already seen
and definitely we will be announcing developments, We see
but we will work with the industries within Malaysia
a couple of very high profile incidences where to explore how we can leverage off the Globex high-frequency
high-frequency trading that has not been well risk engine to bring Malaysia to the world and bring the
managed has had a seriously detrimental impact on world into Malaysia. traders as part
markets. And so were not focused on that market of the business
because of the implications. Le Noble: I would add that as part of our
And something that I think maybe BMD should partnership with Bursa Malaysia the combination of and the market
be contemplating in terms of whether there will leveraging local knowledge and local understanding
be a lot of high-frequency trading on BMD, one of the trade with our experience as an exchange
and we welcome
of the things that high-frequency traders love to enables us to really work closely with BMD in its them
exploit is anomalies in a non-level playing field. thought processes and initiatives around product
Now due to the fact that CMEs hub in Chicago has development. Chong Kim Seng
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We have a long and well-known history of on a larger scale: is electronic access permissible
innovation at CME Group. Were not short of and if so how do we go about it?
products launched and being unsuccessful. Were Having established the most optimal
not short, either, of products launched and being infrastructure, there must be a sufficient amount
very successful, so you know we have an ability of liquidity on BMDs listed products before a
to see both sides of the equation and offer our global institutional client can participate either in
experience in a way that can add to the efforts of a new futures contract that is dollar denominated
BMD. or ringitt denominated.
In terms of foreign demand towards one of
Mitting: One of the challenges is that there is BMD active contracts, the equity Index futures has
an increasingly globalised trading environment potential to grow further given the fact the contract
where theres already a lot of established liquidity was granted the US CFTC approval in a short
elsewhere. In terms of local demand on the period of time a year ago. For global investors that
Lai Choon Lim: retail subject of new products, where do you think the are benchmarked against MSCI or FTSE indices,
participation healthy demand is? Where should BMD be going next in the only avenue to hedge their Malaysian exposure
its product launches? would be trading on the one and only available BMD
equity index futures.
Che Chern: Firstly I can see theres demand there We just need to clear that there is scalability
for the dollar/ringgit contract. But I think that and there is momentum; access is already
the key point is that you dont need to be too something that we have addressed here. Back
innovative. There are two big economies out there in 1997, Malaysia being a fast growing economy
that we need to connect to: one is China and the was dubbed as one of the Asian tigers. We did
other is India. not have any electronic access then, but now we
So as long as we develop according to those are becoming more visible and competitive with
demands, we shouldnt go too far wrong. So what the ability to just point and click and access these
do they need? When we were in China recently marketsand that will keep the momentum going.
meeting traders, they were talking about the
trading hours, so this one of the things that we Mitting: Yes and that could become even greater
should take back and review. Trading hours should quite soon with the CFTC approval of DMA access
be more in line with the Chinese market trading to BMD. When can we expect that go live and
hours, otherwise we are out of sync. what will be the impact of that on the market?
Then there are the products. Although there
has been talk today of launching a gold contract, Chong: We had an application in progress but
many other exchanges have launched gold with the introduction of the Dodd-Frank Act
including Eurex and the Hong Kong Exchange for there was a need to resubmit the application.
example. But all the liquidity is on Comex. There Basically when we started the joint venture with
is some liquidity on other gold contracts but CME Group it went through three applications
Comex is still the most liquid. to the CFTC: one was the approval for direct
But Malaysia could be different, because a marketing into the United States, which was
gold contract would be a good inflation hedge approved in June 2010.
for the local market. Maybe a Malaysian gold And then in June 2011 we got another approval
contract could be launched in this respect, maybe for trading on the KL Index. Now we are waiting
gold could be a dollar-ringgit play. I think that for the direct market access approval. Because of
Asian economies believe in gold. the Dodd-Frank Act we were told to resubmit again
Then there is rubber. Malaysia is a main to refresh our submission, we have done that, so
producer of rubber. So the buyers are here, the hopefully well get the approval soon.
buyers meaning the Chinese buying into Southeast Direct access is really important. What it
Asia rubber. The sellers are essentially Thai, means is that right now we have got US-based
We feel retail Malaysian and Indonesian. So given the right customers, but they have to trade out of the
implementation there will be scope for Malaysia United States and back in again, or they use an
participation to be successful in rubber contracts. entity that is non-US entity.
in Malaysia is But once the DMA comes in, it means that
Mitting: Azila, how do you feel the international they can go straight through the Globex engine. I
quite healthy demand for new products? see US participation as very important, and when
we have the DMA approval from the CFTC, we can
and it is Azila: Most of our customers are foreign-based take that participation to the next level.
growing and what we hear from them lately is that BMD is
much more visible then before. On a macro view Mitting: Thank you and thank you to all of our
Steven Lai Choon Lim the demand is about how to access BMD markets panelists today.