NEW YORK & LONDON--(BUSINESS WIRE)--Commodity-rich Malaysia is attracting local and foreign investors as US and European hedge funds and commodity trading advisors (CTAs) enter the market more aggressively, driven in part by the CME Group’s investment in the Bursa Malaysia Derivatives Berhad (BMD), raising Malaysia’s profile as a global market center for crude palm oil trading and attracting a new source of liquidity.
“Trading activity has picked up significantly at BMD since the CME Group’s investment, with volume rising 37% between 2010 and 2011,” says Matt Simon, a TABB Group senior analyst and author of “Malaysian Derivatives Trading: Growth and Opportunity Ahead,” a 20-page, 15-exhibit research report based on outreach to global banks, including some of the largest futures commission merchants (FCMs) in the world, in addition to foreign and domestic exchanges and technology and infrastructure providers.
Malaysia is in the midst of transitioning to a more developed marketplace that can support and grow into a wider hub for pan-Asian trading and development and be a more interesting market for global investors to consider and participate in. Currently, both palm oil and Kuala Lumpur index futures are the most commonly known Malaysian derivatives contracts but new product development, innovation and the introduction of greater market-making will help facilitate greater interest there. “BMD’s focus on transitioning the market to be more electronic and enhancing straight-through processing will help to reduce costs and improve trading efficiencies,” says Simon.
Although Commodity Futures Trading Commission (CFTC) rules prohibit US traders from direct market access (DMA) trading directly on Globex, the CFTC has been warming to emerging market opportunities and TABB believes DMA access for US domiciled traders could be granted by the end of 2012.
But getting local Malaysian participants engaged more actively as well as marketing efforts targeted at foreign investors is central to increasing trading activity. “There are 20 brokers registered on the BMD with the authority to clear trades on-shore,” says Simon, “a number expected to grow as more brokers are able to justify the investment in a license and are approved to trade and clear in Malaysia.”
As institutional and retail wealth builds, he concludes, “Malaysia could be in the beginning stages of placing a larger blip on the global investor radar screen.”
The report is available for download by TABB Group Research Alliance Derivatives clients and pre-qualified media at https://www.tabbgroup.com/Login.aspx. For an executive summary or to purchase the report, visit http://www.tabbgroup.com or write to info@tabbgroup.com.
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