Kenyataan Media
BURSA MALAYSIA DERIVATIVES LAUNCHES ENHANCED 5-YEAR BOND FUTURES
Bursa Malaysia Derivatives (BMD) successfully launched the enhanced 5-year Malaysian bond futures product or better known as FMG5 on Monday, 1 December 2014.
The CEO of Bursa Malaysia Berhad, Dato Tajuddin Atan said “The enhancements to FMG5 are intended to improve the appeal of the product. The widened duration will allow us to provide greater diversification in the contract basket which we were not able to before. Certainly, the price accuracy and extended trading hours offer greater transparency and flexibility to traders.”
“We are already seeing volatility in the interest rates regime and a shift in the interest rate policies among Central Banks globally. Malaysia will not be insulated and it is important that institutions such as commercial banks, investment banks and insurance companies that have large holdings of bonds take steps to manage their risks. FMG5 provides that avenue as an important risk management tool. To encourage trade participation, we are offering a 6-month fee holiday period from the date of the launch.”
The enhanced FMG5 contract has three changes:
- The extension of the close of trading time from 5.00pm to 6.00pm to capture any activity of the bonds in the European time zone. The final trading time which is currently the 3rd Wednesday at 11.00am is also now extended to 6.00pm on the 3rd Wednesday.
- The final settlement price is now based on actual market trades reported in Bursa Malaysia’s Electronic Trading Platform for bonds (ETP). It was previously based on Reuters’ settlement methodology based on submission of the indicative prices of related bonds in the basket.
- Eligibility within the basket of bonds is now widened, where the time of expiry is increased from a range of 4 ½ to 5 ½ years previously to 4 to 6 years. The current minimum issuance size of RM500 Million will no longer have a minimum requirement. This expansion would increase the number of bonds placed in the basket.
The changes were made after industry consultation and approval from the Securities Commission Malaysia in October this year. In addition, the recent revamp of the participantship structure with the creation of a single trading right in April 2014 now enable all futures brokers to trade on all classes of products on BMD, be it financial, equity or commodity. FMG5 falls within the financial product category.