May launch for CME's dollar-based CPO futures

CHICAGO-BASED CME Group, the world's largest and most diverse derivatives exchange, will launch a new US dollar-denominated cash-settled CPO futures contract, called CUPO, on May 23 this year in Chicago. At real-time, traders in Kuala Lumpur can gain access to this new product on May 24.

"The new US dollar CPO futures contract will be launched on May 24 here (Malaysia)," CME Group commodities managing director Timothy Andriesen told some 1,800 participants attending the Palm and Lauric Oils conference and exhibition 2010 in Kuala Lumpur yesterday.

The CUPO will be traded on CME's platform CME Globex, the most widely distributed electronic trading platform in the world. CUPO price quotes will be based on Bursa Malaysia's settlement ringgit-denominated CPO futures contract, currently the global price benchmark for CPO.

CME Group president Phupinder Singh Gill said apart from running education and awareness programme of CUPO, the exchange will engage market makers in Chicago and Kuala Lumpur. "Market making of CUPO is open to all participants, whether in Chicago or Kuala Lumpur," he said.

Market-makers are usually brokerages and banks that accept risks by quoting both buy and sell prices in futures contracts, hoping to make a profit on the turn or the bid/offer spread. Each market-maker aims to narrow the spread between buyer and seller. Once an order is matched, the market-maker immediately sells from its own inventory or seeks an offsetting order.

CME Group, which clocks in a daily trading volume of around nine million contracts, consists of the Chicago Mercantile Exchange, Chicago Board of Trade (CBOT), New York Mercantile Exchange (NYMEX) and and COMEX. It is the world's largest derivatives exchange for grains, livestock, oilseeds, dairy and timber.

Last year, CME Group bought a 25 per cent stake in Bursa Malaysia's derivatives unit and said it planned to develop a US dollar-based FCPO using settlement prices of ringgit contracts for trading on one of CME's platforms.

The CME Group and Bursa Malaysia tie-up will also see the listing of all existing and future Bursa Malaysia Derivatives products like FCPO, FUPO and FKLI on CME Globex in the second half of this year, said Bursa Malaysia Bhd chief executive Datuk Yusli Mohamed Yusoff.

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