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.