PETALING JAYA: Bursa Malaysia Derivatives Bhd will soon launch its first currency futures contract, the Mini USD/CNH Futures (FCNH) through a licensing agreement established with Hong Kong Exchanges and Clearing (HKEX).
The launch of FCNH on Monday is a significant stride in the advancement of the Malaysian capital market as it will be the country’s inaugural exchange-traded currency futures contract, complementing existing currency markets operated by Malaysian financial institutions.
An exchange-traded currency futures contract can help mitigate counterparty credit risks, as well as provide a transparent, regulated and easily accessible marketplace.
With the introduction of the new asset class within Bursa Malaysia Derivatives’ offerings, traders will have enhanced trading opportunities and arbitrage possibilities across the derivatives markets of Hong Kong and Malaysia.
Designed as a smaller-sized, cash-settled contract, FCNH offers investors a capital-efficient way to achieve renmenbi currency hedging over their investment holdings since it does not require investors to exchange the initial sum invested.
This will be very useful for participants, such as SMEs and business owners with transactions in China, to hedge their risks on fluctuations in the US dollar and offshore renminbi currencies.
“The launch of FCNH is timely given the current volatility in global markets, which has led to increasing demand among market participants and businesses to manage their foreign currency exchange exposure,” said Datuk Muhamad Umar Swift, chairman of Bursa Malaysia Derivatives and CEO of Bursa Malaysia.
“Our licensing agreement with HKEX for FCNH and product collaboration with DCE are testaments to Bursa Malaysia Derivatives’ commitment to forging strategic alliances and deepening global market connections. We are optimistic that these efforts will enable market participants to effectively navigate the complexities of international markets and adeptly manage crossmarket risks,” he added.
