Malaysia's first futures exchange opens for trade<\/p>\n
KUALA LUMPUR (Reuter): Malaysia's first futures bourse, the
\nKuala Lumpur Options and Financial Futures Exchange (KLOFFE),
\nopened for trading yesterday, bringing the nation closer to its
\ndream of becoming a regional financial center.<\/p>\n
Its first futures contract, based on the Kuala Lumpur Stock
\nExchange's Composite Index (KLCI), rolled out at 01:30 GMT, a
\nlittle over five years after it was first conceived.<\/p>\n
"It is a soft launch, insofar as we wanted to go out gently
\nand make sure that all systems are behaving themselves and
\nbrokers are comfortable," said KLOFFE's chief operating officer
\nJohn Duggan.<\/p>\n
KLOFFE has survived criticism from even Prime Minister
\nMahathir Mohamad, who once called it "unnecessary gambling", and
\nthe Barings collapse, which almost got it shelved.<\/p>\n
The collapse of Barings Bank due to dealings in derivatives by
\nrecently convicted trader Nick Leeson triggered a widespread
\ndebate in Malaysia over the need for a futures trading
\ninstitution.<\/p>\n
It was finally left to the central Bank Negara and the
\nSecurities Commission to decide its fate. They initiated an
\namendment to the Futures Industry Act and toughened other rules
\nto make trading safer, delaying KLOFFE's launch by nearly a year.<\/p>\n
But there were no ecstatic celebrations, not even the once
\nplanned opening by Mahathir, for only the third futures exchange
\nin the region after Hong Kong and Singapore.<\/p>\n
Only 14 brokers, who have received the Securities Commission's
\ntrading license, began operations on the first day and, by noon,
\neach one of them had struck at least one contract.<\/p>\n
The first contract done was for spot month (December) at 1,001
\npoints on the KLCI. Under the contract, the buyer agrees to take
\ndelivery of the underlying security (in this case the index) at a
\npre-agreed date and price.<\/p>\n
Since there is no physical security that can be delivered in
\nthis case, each index point has been valued at 100 ringgit
\n(US$39.37), which means the first contract was at 100,100 ringgit
\n($39,409.45), KLOFFE officials explained.<\/p>\n
At the lunch break, there were 78 contracts done, 77 in spot
\nmonth and one in next month (January). Four contracts have been
\nlaunched, spot, next month and following two quarterly calender
\nmonths (March, June).<\/p>\n
"Volume in the morning session indicates that the market has
\ngood potential," said James Lau, Chief Executive of CIMB Futures,
\none of the 14 firms which started trading.<\/p>\n
"Nobody expected an explosive start, and there wasn't one,
\nwhich was good," he said.<\/p>\n
He said the trend on KLOFFE was in line with the cash market,
\nthe Kuala Lumpur Stock Exchange (KLSE). "This shows we are moving
\nin the right direction," he said.<\/p>\n
Contract values dropped with a decline in the index on the
\nKLSE. KLCI dropped 7.61 points 0430 GMT to 988.65 and the spot
\nmonth contract dropped to 990.00.<\/p>\n
Duggan said the number of trading houses will increase to 40
\nby early next year.<\/p>\n
He said a lot of work had gone into making trading on KLOFFE
\nsafe and transparent. "The KLOFFE system is one of the most
\ntransparent systems in the world."<\/p>\n
He said KLOFFE officials had visited broking houses for
\ninspection to ensure that they were ready to start trading.<\/p>\n
KLOFFE will continue with the KLCI-based contracts until late
\nnext year, when other new products including stock options will
\nbe introduced, Duggan said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/malaysias-first-futures-exchange-opens-for-trade-1447893297",
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