First futures exchange to open up next month

JAKARTA (JP): The Jakarta Futures Exchange (JFX), Indonesia's first commodities futures bourse, says it is ready to have its inaugural trading day next month after several delays.

JFX director Rico Menayang said the futures exchange is technically ready to start trading activities as most of the necessary preparations have been completed.

"All that's left is getting a license from the government," Rico told The Jakarta Post on Saturday. He added that he expected the Commodities Exchange Supervisory Board (Bappebti) would issue the operating license sometime next week.

"We should be operating on Sept. 1 as expected," he said.

Bappebti, he added, would issue a license within 45 days of the submission by JFX of the documents stating that all the requirements had been meet.

The exchange submitted the necessary documents to Bappebti last month, he said.

A futures exchange serves as a centralized location where buyers' and sellers' agents meet to trade futures on whichever commodities the particular exchange lists for trading.

Among the necessary preparations, Rico said, were the installment of the exchange's computer system, which took JFX several months to complete.

JFX, established in August 1999, was initially scheduled to start trading in March. But installation problems with its computer system, forced the exchange to postpone trading to July, which then dragged on to September.

Indonesia has been toying with the idea of introducing futures trading since the early 1990s but was concerned over the possibility of speculators distorting the market.

Rico said that other requirements, such as the exchange's brokers and the commodities futures contracts, were already well prepared.

The JFX promoters, he said, had spent some Rp 2 billion (about US$238,000) on installing the computer system and other preparations.

At present, he said, the exchange had 21 brokers of which 14 were still awaiting operating licenses from Bappebti. "The other seven still have to submit their applications to Bappebti," he added.

JFX plans to trade crude palm oil and Robusta coffee during the initial phase.

Indonesia is the world's largest producer of palm oil after Malaysia and is a major producer of coffee.

Traders say the exchange will help make both markets more transparent and will give them an alternative to Malaysia. At present Indonesian traders hedge on the Kuala Lumpur Commodities Exchange.

But Rico said the exchange expected to include four additional commodities, namely pepper, plywood, cocoa and rubber, next year.

The trading of these commodities, he said, was approved by then President B.J. Habibie under a presidential decree last year.

Furthermore, he said, the JFX planned to also include financial trading instruments such as foreign exchange, interest rates and government bonds.

"We will make a proposal to the government next year," he said.

The JFX was founded by four palm oil plantations, seven palm oil refineries, eight securities companies and two general trading companies, and has authorized capital of Rp 40 billion and paid-up capital of Rp 11.6 billion.

Its listed brokers include PT Batavia Futures, PT Artha Berjangka, PT Dana Graha Futures and PT Gading International Berjangka.

Aside from the JFX, another group of commodities' traders also planned to open a separate futures commodity exchange to trade rice, sugar, soybeans, tobacco and cotton.

This second commodity bourse, known as the Jakarta Commodity Exchange or Jacom, has yet to announce when it plans to start trading. (bkm)