KL futures trading faces hurdles

KL futures trading faces hurdles

KUALA LUMPUR (AFP): Malaysia's sole commodity exchange is still battling to convince the government it is ready to start trade in financial futures despite being allowed two years ago to compete with a private outfit in the same business.

Exchange officials said yesterday the Kuala Lumpur Commodity Exchange (KLCE)'s target date to commence trading in September in interest rate and government bond futures might be hampered by the Securities Commission ruling that the two formed a common clearing house.

"We already have our own clearing house. We are ready to proceed on our own if the Securities Commission gives the nod now," said KLCE's chief executive Syed Jabbar Shahabuddin.

"We don't know how long we have to wait if the commission insists on waiting for the other party to prepare itself," said Syed Jabbar, referring to the Kuala Lumpur Options and Financial Futures Exchange (KLOFFE) set up by politically connected parties.

KLOFFE, which has yet to commence business, was initiated in 1990 by listed Renong Bhd., a company linked to Prime Minister Mahathir Mohamad's United Malays National Organization (UMNO), New Straits Times Press, and securities firms Rashid Hussain Bhd. and Zalik Securities.

The Securities Commission's ruling is deemed a major setback for the 14-year-old KLCE, which has been seeking to diversify from its lackluster commodity base to remain viable.

The government decided in 1992 that KLOFFE took off with index futures and stock options, while KLCE focused on interest rates and governments futures contracts to prevent direct competition.

KLCE's chairman, Syed M.A. Alhady, who earlier said the government would be sounding the death knell of the KLCE if it barred it from diversifying into financial futures, said KLOFFE wanted a clearing house with an expensive electronic system the KLCE could ill-afford.