KUALA LUMPUR: Bursa Malaysia Derivatives’ (BMD) crude palm oil (CPO) futures contract set a new record at the close of mid-day trading yesterday, with a total of 4.07 million contracts traded year-to-date.

The record surpassed the previous record of 4.06 million contracts traded for the whole of last year, Bursa said in a statement yesterday.

It was also the highest number of contracts traded annually since FCPO contracts started trading in 1980.

Bursa CEO and BMD chairman Datuk Tajuddin Atan said the achievement strengthens the position of Bursa’s FCPO contracts as the global pricing benchmark for palm oil and palm oil-based products.

“The uncertainty in global financial markets has resulted in a shift of funds from equities to other asset classes and this trend is expected to continue over the next few months,” he said in the statement.

Bursa noted that open interest for FCPO contracts on BMD has risen steadily on the back of an even mix of players in the futures market.

The last time open interest hit an all-time high was on July 15, with 136,602 contracts.

In a move to provide greater visibility and accessibility to international traders, BMD migrated its products onto the CME Globex electronic trading platform on Sept 20, 2010 following its collaboration with the CME Group in 2009 in which the operator of the world’s largest derivatives exchange acquired a 25% stake in BMD.

CME has the largest options and futures contract open interest of any futures exchange in the world. The deal with Bursa included the licensing of settlement prices of the FCPO to position Malaysia as the global price benchmark for the commodity as well as global distribution of Bursa products through the Globex electronic trading platform.

Prior to the deal with CME, Bursa had explored deals with other exchanges in Singapore, India and China, but all fell through. Bursa had tied up with Singapore’s Joint Asian Derivatives Exchange and the Chicago Board of Trade.

On the CPO prices, OSK Research in a recent note said palm oil price is set for a counter trend rally as it believes the price for the commodity has hit bottom.

“The bearish forces which had caused palm oil price to dip below RM3,000 appear to be spent for now as inventory continues to ease,” it said.

It said the weakening domestic palm oil production is also supportive of higher palm oil prices in the immediate term, especially given its large US$246 (RM750) discount to soybean oil.

OSK added that production issues could lead to a narrowing in the spread to soybean oil to some US$100 per tonne, which will take palm oil price to RM3,500 per tonne.

This article appeared in The Edge Financial Daily, September 14, 2011.