Understanding Commodity Futures Exchanges and JFX: What Is Their Function for the Economy?
Indonesia is known as one of the world’s major producers of various commodities, ranging from palm oil, tin, and nickel to rubber and coffee. However, large production volumes do not automatically make prices formed in Indonesia the reference for trading these commodities. For palm oil, for instance, market participants still largely look to prices formed on the Bursa Malaysia Derivatives (BMD). Meanwhile, for a number of metal commodities, the London Metal Exchange (LME) serves as one of the international benchmarks. This situation underscores the importance of domestic commodity futures exchanges and the price formation process within the country.
In simple terms, commodity futures trading involves buying and selling commodities for settlement at a future date based on futures contracts or other derivative contracts. Unlike buying goods at a market where payment and delivery can occur immediately, futures trading uses contracts with predetermined terms. In Indonesia, futures trading activities are legally grounded in Law Number 32 of 1997 concerning Commodity Futures Trading, which was amended by Law Number 10 of 2011. The supervisory ecosystem subsequently changed with the issuance of Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (P2SK).
One of the organisers of futures trading in Indonesia is the Jakarta Futures Exchange (JFX). JFX was established on 19 August 1999 and commenced trading on 15 December 2000. Within this ecosystem, the exchange does not determine the price of a commodity. JFX provides the trading system and facilities, the contracts being traded, and the rules that serve as the basis for market participants to conduct transactions. In other words, the exchange can be likened to a marketplace that brings together sellers and buyers. Prices then emerge when supply and demand meet through transactions.
This process is known as price discovery. JFX President Director Yazid Kanca Surya stated that a strong reference price cannot be born from unilateral determination. “A reference price is built through the price discovery process. When transactions occur openly, involve many market participants, and are conducted continuously, the resulting price will increasingly reflect actual market conditions. It is from this process that a credible reference price is born,” Yazid said during a media workshop in Jakarta on Tuesday (4/8/2026).
The more transactions and market participants involved, the more supply and demand information is reflected in the price. Therefore, liquidity is a crucial element for the price formed on the exchange to develop into a trusted market reference. This also explains why being the largest producer does not necessarily make a country the price setter or reference. An active, transparent, liquid, and continuous market is needed for the formed price to gain wider acceptance.
This issue is relevant for Indonesia. As a major producer of several commodities, strengthening domestic price formation can reduce dependence on foreign benchmarks while ensuring that the prices used by businesses better reflect domestic supply and demand characteristics. “The more active the trading, the more market information is reflected in the price. For businesses, prices formed through this process not only serve as a reference in conducting transactions but also as a basis for managing risk when the market moves very dynamically,” Yazid said.