KL to start futures exchanges amid hurdles<\/p>\n
KUALA LUMPUR (AFP): Malaysia will proceed to launch two
\nfinancial futures exchanges by year's end despite being jolted by
\nthe downfall of British merchant bank Barings plc due to failed
\nderivative deals, officials said yesterday.<\/p>\n
\"At this moment, plans are intact for a year-end launch of the
\ntwo exchanges,\" said a senior financial official, amid confusion
\nsparked by Prime Minister Mahathir Mohamad's remarks that
\nMalaysia did not need to trade financial derivatives.<\/p>\n
Mahathir said on Friday he did not see the need for Malaysia
\nto introduce derivatives trading as it was a form of gambling
\nthat could wreck other financial institutions as it did Barings.<\/p>\n
His comments came after his deputy, Anwar Ibrahim, said
\nMalaysia had no plans to overregulate its emerging financial
\nfutures markets amid concern over the billion-dollar financial
\nderivatives fiasco that broke 233-year-old Barings.<\/p>\n
Officials of the Kuala Lumpur Options and Financial Futures
\nExchange (KLOFFE) and Kuala Lumpur Futures Market (KLFM) said
\nplans had not been altered by the Barings collapse.<\/p>\n
KLOFFE is to trade in equity-based derivative products
\nincluding stock index and stock options, while the KLFM will
\nfocus on trading in interest-rate futures.<\/p>\n
Mahathir, clarifying his remarks made on Friday, said at the
\nweekend that the existence of a derivatives market in Malaysia
\ncould be beneficial if properly regulated and not misused.<\/p>\n
\"KLOFFE is a good thing ... but for hedging and not for
\nspeculation,\" said Mahathir, admitting that it would be
\ndifficult, however, to impose regulations to prevent speculation.<\/p>\n
Mahathir said there would be a futures market in Kuala Lumpur
\nfor commodities and \"other things\".<\/p>\n
The prime minister had on Friday likened derivative trading to
\nbetting on horses, which he said, was carrying speculation too
\nfar.<\/p>\n
Caution has been heightened concerning the risks and pitfalls
\nof derivatives following the collapse of Barings under the weight
\nof an estimated billion dollars in losses allegedly incurred by
\n28-year-old trader Nick Leeson.<\/p>\n
\"Mahathir has always been very concerned with the unscrupulous
\nuse of financial instruments, especially after the central Bank
\nNegara made massive losses trading currencies,\" said the official
\nwho declined to be named.<\/p>\n
The Barings debacle had made the government aware of the need
\nfor proper surveillance and good internal controls, the official
\nsaid, stressing that no amount of laws and regulations could
\nlegislate against dishonesty and fraud.<\/p>",
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