Bursa Malaysia has embarked an on aggressive plan to grow its derivatives market by 40% this year, introducing new fee structures to accelerate the use of the investment product. Aside from its drive to boost the liquidity of the market, the move by Bursa Malaysia will also align its practices with other markets around the region and increase its pricing competitiveness.

The new derivatives fee structure will take effect from 1 April and will cover the KLCI futures contract (FKLI) and the crude palm oil futures contract (FCPO). On top of that, the new rules will also apply to the exchangeÆs range of financial derivatives futures contracts.

Under the new fee structure, the exchange and clearing fee for the FKLI will drop from RM6 to RM5 and the FCPO will ease from RM4 to RM3. Within its financial derivatives series, Bursa Malaysia will reduce the exchange and clearing fee from RM3 to RM1.

Additionally, the new regulations will also raise the current the open-position limit for any given month from 3,000 contracts to 5,000 contracts. The position limit for all months combined will also be increased from 5,000 to 8,000 contracts.

For its crude palm oil futures contracts, Bursa Malaysia will also extend the time period from 12 to 24 months with the addition of six alternate month contracts.

According to those trading derivatives in Malaysia, many of these new fee structures and regulations have been rolled out to compete with the Singapore Stock Exchange (SGX). Aside from bringing its fees down to compete with the SGX for contracts traded, many also believe that the new regulations are designed to counter threats from its Southern rival, which plans to launch crude pal oil futures contracts by the year end.

Currently, derivatives contribute approximately 12% of Bursa MalaysiaÆs revenue. Of the contracts that are traded on the exchange, Bursa Malaysia expects roughly 57% are commodity derivatives. Equity-based contracts comprise of 35% of the total derivatives on Bursa Malaysia, while financial derivatives account for 8%. Volume surged to 2.23 million contracts at end-2006 from 480,000 contracts in 2001.

Going on present figures, retail and professional traders account for 50% of all derivatives trades of the trades. On the institutional side, domestic and foreign institutions contribute a total of 39% of all derivatives trades.