Based on prices from Bursa Malaysia Derivatives’ (“BMD”) Crude Palm Oil futures contract (“FCPO”), the USD Malaysian Crude Palm Oil Calendar Swap fills a niche area for customers who are looking both to trade in the far forward months, and for these trades to be universally cleared by a central counterparty as opposed to bilaterally between parties.
James McKay, a broker at Starsupply Singapore said,
“It’s great to finally have a cleared product for USD palm oil. It has traded OTC bi-laterally for quite some time, but with an increasingly prohibitive credit and regulatory environment, we think there is a demand for a standardized, centrally cleared USD palm contract that does not require financing or ISDA agreements to trade. Starsupply has been involved in starting a number of OTC markets and believe that this product has the key elements required to grow into a functioning OTC product.”
“These new calendar swaps provide an additional tool for customers in Singapore, Malaysia and around the world, to manage counterparty risk in their underlying cash positions in crude palm oil. We are pleased to see the first trade of these palm oil swaps, and look forward to continue working together with our partner Bursa Malaysia Derivatives to further build new tools for the palm oil industry,” said Nelson Low, Executive Director, Commodity Products, CME Group. “Bids and offers are readily available from interdealer brokers specializing in palm oil, and trades can be submitted for clearing through CME ClearPort.”
As the world’s leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. CME Group brings buyers and sellers together through its CMEGlobex® electronic trading platform and its trading facilities in New York and Chicago. CME Group also operates CME Clearing, one of the world’s leading central counterparty clearing providers, which offers clearing and settlement services across asset classes for exchange-traded contracts and over-the-counter derivatives transactions. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk.
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