KUALA LUMPUR (Sept 19): Bursa Malaysia Derivatives hopes its newly enhanced gold futures (FGLD) contract will increase the market’s attractiveness, as it eyes 62,000 lots to be traded in 2023, with an average of 250 contracts daily.
Bursa chief executive officer Datuk Muhamad Umar Swift said the cash-settled contract is now quoted in US dollars, with settlement in ringgit based on a fixed multiplier of 40, from which the final settlement value as well as profit and loss are derived.
“As a result, domestic investors’ exposure to the currency risk between the US dollar and ringgit would be reduced. Malaysia is a commodity market, and that is the strength, renowned particularly in Asean, so this a contract that will be attractive to retail and institutional investors,” he told a press conference after the relaunch of the FGLD contract here on Monday (Sept 19).
Earlier in his speech, Umar said given the recent surge of global interest in gold, the introduction of the enhanced FGLD contract is timely, as it provides domestic investors with an alternative trading avenue.
“In challenging times, it is critical for market participants to keep abreast of the latest hedging strategy to mitigate against fluctuating commodity prices.
“With the availability of the enhanced gold futures contract, investors now have an alternative trading instrument for managing and diversifying their portfolios,” he said.
For the remaining months of this year, acting director Mohd Saleem Kader Bakas said Bursa expects 9,000 lots of FGLD contracts to be traded from October to December, with an average of 125 contracts daily.
The FGLD contract has been enhanced to provide investors with immediate exposure to international gold price movements, with greater trading opportunities amid gold market volatility.
The final settlement value of the enhanced FGLD no longer requires any foreign exchange rate adjustment, given that the contract’s fixed multiplier already serves as the rate to compute the ringgit contract value. The enhanced FGLD contract’s final settlement price is determined by the London AM Fix Price, which is the internationally recognised gold benchmark price.
Read More: Bursa relaunches FGLD, eyes 250 gold futures contracts daily in 2023