KUALA LUMPUR (April 22): The Securities Commission Malaysia (SC) has flagged rising competition from regional exchanges as a growing risk to the dominance of crude palm oil futures (FCPO), the main global benchmark for palm oil prices since 1980.
“In 2025, FCPO continues to lead the market, yet concerns remain on increase in competition from regional exchanges which might eventually challenge FCPO’s dominance as well as the Malaysian ETD (exchange traded derivatives) ecosystem which remains heavily concentrated in a single product,” said the SC in its 2025 Capital Market Stability Review report released on Wednesday.
Despite evolving headwinds in the palm oil market — including weaker demand from key export destinations, intensifying competition from Indonesia, narrow price spreads versus other vegetable oils and the impact of the European Union Deforestation Regulation — FCPO continues to provide risk management solutions last year, with foreign institutions accounting for more than half of trading activity.
Indonesia, the world’s largest palm oil producer, started its own CPO futures exchange in 2023 to reduce reliance on Malaysian prices. Singapore, meanwhile, launched its CPO futures in 2007 to provide US dollar alternative to the Malaysian benchmark priced in ringgit.
While trading activity in Singapore has contracted to minimal levels, Indonesia’s futures market for CPO picked up in 2025 though the number of trading contracts was a fraction of the volume on Bursa Malaysia Derivatives.
Trading volume for FCPO on Bursa Malaysia Derivatives reached 19.62 million contracts in 2025, equivalent to 490.43 million metric tonnes, reflecting its dominance in global palm oil futures.
FCPO, together with FTSE Bursa Malaysia KLCI Futures (FKLI), accounted for nearly 99% of total market activity, pointing to structural vulnerabilities in the event of significant shifts in either contract, said the SC.
These two fall under derivatives which are key instruments for hedging, price discovery and risk management, particularly amid rising global trade tensions, geopolitical risks and broader economic uncertainty.
Last year, financial markets experienced heightened volatility, while commodity markets were weighed down by softer global demand, compounded by evolving trade and energy policies.