By Huileng Tan
KUALA LUMPUR--The CME Group is seeing growing participation in
its U.S. dollar-denominated Malaysian crude palm-oil calendar swaps
amid market volatility, executives said on the sidelines of an
industry conference Tuesday.
Through CME ClearPort, a record 6,200 lots of palm oil swaps
were cleared in September last year, while swap volume grew 59% in
2014 over an annualized figure in 2013, executives from the market
operator said in Kuala Lumpur.
"Obviously, there's been a lot of volatility in the commodity
markets as prices have come down from the elevated levels they were
at in the last few years and that [prompts] more need to hedge,"
said managing director for commodity research and product
development, David Lehman.
Last year, global benchmark Bursa Malaysia Derivatives crude
palm-oil contract hit an 18-month high of 2,916 ringgit a ton in
March before tumbling to a 5½-year low of 1,914 ringgit a ton in
September. They then hit a six-month high in January due to
concerns about floods hitting production, before falling back on
slowing demand. The futures rallied last month after major producer
and user Indonesia announced a subsidy hike for biofuel
production.
Other factors contributing to price swings in palm oil prices
include the slump in crude-oil prices and the weak Malaysian
ringgit, which dropped to a six-year low against the U.S. dollar in
January.
CME's palm swap was launched in July 2013 after the exchange's
U.S. dollar-denominated crude palm-oil contract failed to gain
traction due to the strong following on BMD. The palm swap
references the BMD CPO contract.
Two-thirds of those participating the CPO swaps are biofuel
traders and producers, said CME's executive directory of commodity
products in Asia, Nelson Low.
"It's a useful tool for people who want to trade CPO but do not
want the currency exposure [with the Malaysian ringgit]," said Mr.
Low.
The CME prices, which are settled on a calendar average, is also
appropriate for some users who use a fixed amount of palm oil in
the calendar month, and for those who do spread trade against U.S.
dollar-denominated gasoil.
Mr. Low added that the CME is planning to launch more palm
products but declined to reveal further details.
Write to Huileng Tan at Huilend.tan@wsj.com
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