Bursa Malaysia Derivatives Exchange (BMD), renowned for its crude palm oil futures, is set to launch a soyoil futures contract on March 18, aiming to facilitate arbitrage opportunities between soyoil and palm oil contracts. Abdul Wahid Omar, the chairperson, announced this milestone during an industry conference, highlighting the significance of this initiative as the first non-palm-based edible oil futures to be listed on Malaysia Bursa Derivatives.
The introduction of the soyoil contract is designed to enable seamless arbitrage between soybean oil and palm oil prices on a unified platform, offering market participants enhanced flexibility and trading opportunities. BMD will utilize the settlement price of the soyoil futures contract on the Dalian Commodity Exchange (DCE) as the foundation for determining the settlement price of its new U.S. dollar-denominated soyoil futures.
Given the interdependence of price movements among palm oil, soyoil, sunflower oil, and rapeseed oil, the launch of the soyoil futures contract is poised to streamline risk management strategies for traders and refiners operating across different edible oil markets. While the Chicago Mercantile Exchange (CME Group) currently offers a prominent soyoil futures contract utilized as an industry benchmark, BMD’s foray into soyoil futures is expected to introduce new dynamics to the market.
Despite the promising prospects of the new soyoil contract, industry experts caution that BMD may face challenges in attracting significant participation and liquidity, considering the robust existing soyoil contracts available on platforms like CBOT and DCE. Enhancing participation and liquidity will be crucial for establishing the new contract as a preferred trading avenue within the edible oil futures market.
In addition to the developments in the derivatives market, Abdul Wahid Omar also expressed optimism regarding Malaysian palm oil prices in 2024, citing increased demand from key markets. However, he advised market participants to remain vigilant amid potential challenges to navigate evolving market dynamics effectively.