THE FUTURES OF PALM OIL. NOW IN ONE MARKETPLACE. FPOL

Transcription

1 THE FUTURES OF PALM OIL. NOW IN ONE MARKETPLACE. FPOL Palm Olein Futures

2 WHICH TYPE OF TRADER ARE YOU? Every trader has different goals, and your approach to achieving them depends on your risk/return appetite. You can find your trader type on this chart and then see what other products you might consider having in your portfolio besides the one in this brochure. THERE SSOMETHINGFOR EVERYONE ONBURSAMALAYSIA

3 FPOL MALAYSIAN USD RBD PALM OLEIN FUTURES IS NOW AVAILABLE ON CME GLOBEX Global Access Exposure to world s largest produced and exportable edible oil and fats Diversified users of contract FPOL TICKER CODE CME Globex : BMD\FPOL\relevant contract month code Example : BMD\FPOL\AUG14 Bloomberg : FPOA Comdty CT (Go) Thomson Reuters : <1FPOL> + <Month Code> + <Year Code> Example : <1FPOLU4> SEP14 contract Interactive Data : F:FPOL\MYY, where M is month code and YY is year number Example : F:FPOL\U14 SEP14 contract 1

4 1 WHAT IS FPOL? FPOL is a US Dollar ( USD ) denominated Refined, Bleached and Deodorised (RBD) Palm Olein Futures contract traded on Bursa Malaysia Derivatives. Being a refined palm product, FPOL specifically provides palm refiners, end users of palm olein and foreign palm olein importers a transparent price discovery, regulated trading and hedging instrument. Fresh Fruit Bunch (FFB) Enters the plant for processing Crude Palm Oil Refining Process Refined, Bleached and Deodorised Palm Olein Contract Size: Each FPOL contract is equivalent to 25 metric tons Settlement: This is a physically deliverable contract 2

5 2 WHY TRADE FPOL? 1. Global Access FPOL is traded electronically on CME GLOBEX, a global electronic trading platform. Accessing CME Globex is easy, and it allows individual and professional traders anywhere around the world to access all Bursa Malaysia Derivatives products. 2. Manage RBD Palm Olein Price Risk End users and importers can use FPOL to manage risk and hedge against the risk of unfavourable price movement in the physical market. 3. Manage Palm Refining Margin Refiners can use FPOL to manage their refining margins. Together with FCPO, refiners can now lock in their refining margins in paper. This can be achieved with going long on FCPO and short on FPOL. 4. Exposure to RBD Palm Olein Price Movements Traders can use FPOL to gain leveraged exposure to movements in RBD Palm Olein prices. 5. Gain Immediate Exposure to Commodity Market Via FPOL, global fund managers, commodity trading advisers and proprietary traders are able to gain exposure to one of the largest edible oil in the world. 3

6 3 PHYSICAL DELIVERY AND TENDER PROCESS Tender Notification Participants with spot month short positions may submit Tender Notifications for the delivery of RBD Palm Olein during the tender period (1st 20th of spot month). Tender Notifications must be submitted to Clearing House by 12:00 noon for same day processing. e-negotiable Storage Receipts (e-nsrs) A seller who intends to have RBD Palm Olein appraised for delivery to the market must deliver the RBD Palm Olein to a Port Tank Installation approved by the Exchange. Upon appraisal of the RBD Palm Olein, the Port Tank Installation owner shall issue an e-nsr. Tender Advice and Delivery Allocation The Clearing House will allocate the e-nsr to the respective Buying Clearing Participants on a proportionate basis and further allocate the e-nsr on a random basis at the client s level. Tender Restriction Period Restriction on closing out of position for spot month contract takes effect one business day before the start of Tender Period and lasts until the end of Tender Period. Tender Cycle and Payments The tender fees will be posted to seller and buyer account at the End of Day on tender day. The delivery cycle for FPOL tender is two business days. Buying Participant will pay the tender amount and Selling Participant will receive payment two business days after tender. The e-nsr will be released to Buyer upon receipt of payment. 4

7 MARGINS AND APPROVED CURRENCIES 4 The Initial Margin amount is to be deposited with your licensed Futures Broker prior to trading. All currency deposits (except US Dollar) for the Initial Margin are subjected to hair cut rates as determined by Bursa Malaysia Derivatives Clearing from time to time. While Variation Margins are in US Dollar (USD), Initial Margins are accepted in various currencies listed below: Malaysian Ringgit (MYR) US Dollar (USD) British Pound (GBP) Euro (EUR) Hong Kong Dollar (HKD) Japanese Yen (JPY) Chinese Renminbi (RMB) Singapore Dollar (SGD) Australian Dollar (AUD) Please refer to your Futures Broker for other approved collaterals. 5

8 5 TRADING EXAMPLES Scenario 1 - Benefit from Bullish Market ABC Pte. Ltd. is a packer of cooking oil. The company is required to deliver 10,000 MT in 6 months time. The company anticipated that the cost of purchasing RBD Palm Olein will be higher during that period of time. By using the FPOL the company can protect themselves against the anticipated upward price movement. Assume it is currently January 2015 and the RBD Palm Olein needs to be delivered in July The current selling price in FPOL is USD 800 per MT and the company anticipates that the RBD Palm Olein price in July 2015 will be USD 850 per MT. How can FPOL be used in this scenario? The company can lock in the price now at USD 800 per MT by buying 400 lots (10,000 MT/25 MT) of July 2015 contract and hold this position till expiry to collect the physical RBD Palm Olein. Calculation: 1 FPOL Contract = 25 MT Assuming ABC Pte. Ltd. is right and the cost of RBD Palm Olein in July 2015 is USD 850/MT ABC Pte. Ltd. total profit in FPOL for the trade would be: Total Profit = [(USD 850*25) - (USD 800*25)]*400 = USD 500,000 Scenario 2 - Arbitraging A trading house observes the FPOL is trading at a premium to another exchange s RBD Palm Olein Futures. It decides to sell FPOL and buy the other exchange s RBD Palm Olein to arbitrage. The position will be liquidated later once the spread of the prices between both markets returns to normal. The trading house benefits from the temporary price discrepancy between the 2 markets. * Initial Margins are to be deposited prior to trading * Transaction costs have been excluded in this example 6

9 Scenario 3 - Benefit from Bearish Market DEF Pte. Ltd. is a refiner. The company has been required to deliver 10,000 MT in 6 months time down the road. The company anticipated that the selling price of RBD Palm Olein will be lower during that period of time. By using the FPOL the company can protect themselves against the downward price movement. Assuming the current month now is January 2015 and the RBD Palm Olein needs to be delivered in July The current selling price is USD 900 per MT and the company anticipates that the price in July 2015 will be USD 850 per MT. How can FPOL be used in this scenario? The company could lock in the price now at USD 900 per MT by selling 400 lots (10,000 MT/25 MT) of July 2015 and liquidate when the price goes down. Calculation: 1 FPOL Contract = 25 MT Total Palm Olein to be hedged is 10,000 MT which is equivalent to 400 lots of FPOL. Total Profit: [(USD 900*25) - (USD 850*25)]*400= USD 500,000 Scenario 4 - Managing refining margin risk GHH Berhad buys 10,000 MT of Crude Palm Oil to refine which needs to be delivered in June Prices of the Crude Palm Oil have been fluctuating recently and this has affected their refining margin. The company could hedge their refining margin by using FPOL and FCPO. The company has anticipated the price of the Crude Palm Oil will increase and hence this will affect the company s refining margin. Assume it is currently January The current selling price in Crude Palm Oil is RM 2,560 or USD 800 per MT (USD 1 = RM 3.20) and the RBD Palm Olein price is USD 900 per MT. * Initial Margins are to be deposited prior to trading * Transaction costs have been excluded in this example (Continued overleaf) 7

10 (Continued) The company anticipates that Crude Palm Oil prices will increase to USD 850 by June 2015 and the price of the RBD Palm Olein to decline to USD 880. Refining Margin (fixed cost): RM 100 / MT Refining Margin in June 2015 to increase: RM 130 / MT How can FPOL and FCPO be used in this scenario? The company could go into a long position of 400 lots (10,000 MT/25 MT) June 2015 FCPO at USD 800 per MT and a short position of 400 lots (10,000 MT/25 MT) June 2015 FPOL at USD 900. The refining margin can hence be maintained at RM 100 / MT * Initial Margins are to be deposited prior to trading * Transaction costs have been excluded in this example 8

11 WHAT OTHER PRODUCTS DO WE OFFER? 6 Equity Derivatives FTSE Bursa Malaysia KLCI Futures (FKLI) Options on FTSE Bursa Malaysia KLCI Futures (OKLI) Single Stock Futures (SSFs) Financial Derivatives 3-Month KL Interbank Offered Rate (KLIBOR) Futures (FKB3) 3-Year Malaysian Government Securities Futures (FMG3) 5-Year Malaysian Government Securities Futures (FMG5) Commodity Derivatives Gold Futures (FGLD) Crude Palm Oil Futures (FCPO) Options on Crude Palm Oil Futures (OCPO) USD RBD Palm Olein Futures (FPOL) USD Crude Palm Oil Futures (FUPO) Crude Palm Kernel Oil Futures (FPKO) 9

12 7 GETTING STARTED Step 1 Open a Futures Trading Account with a licensed Futures Broker of Bursa Malaysia Derivatives Step 2 Deposit Initial Margin with your Futures Broker Step 3 Start trading FPOL How do I learn more? Please contact your preferred licensed Futures Broker who will advise and update you accordingly. You can also attend the various educational seminars listed on Bursa Malaysia s website. 10

13

14

15

16 Disclaimer This brochure has been provided for general information purposes only. The information contained does not constitute financial or trading advice and neither does it make any recommendation regarding the product/s mentioned herein. Although care has been taken to ensure the accuracy of the information within this brochure, Bursa Malaysia Derivatives and Bursa Malaysia Group does not warrant or represent, expressly or impliedly as to the accuracy or completeness of the information herein. Bursa Malaysia Derivatives and Bursa Malaysia Group further does not warrant or guarantee the performance of any product/s referred to in this brochure. All applicable laws, regulatory requirements and rules, including current Rules of Bursa Malaysia Derivatives and Rules of Bursa Derivatives Clearing should be referred to in conjunction with this brochure. Bursa Malaysia Derivatives and Bursa Malaysia Group do not accept any liability for any financial or trading decisions made by the reader or any third party on the basis of this information. You are advised to seek independent advice prior to making financial or trading decisions. BURSA MALAYSIA BERHAD Exchange Square Bukit Kewangan Kuala Lumpur Malaysia Tel: +(603) Fax: +(603)