What impact will night trading have on Malaysian derivatives market attractiveness?

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Night Trading to Enhance Attractiveness and Liquidity of Malaysian Derivatives Market

Bursa Malaysia Derivatives Bhd's introduction of an after-hours (T+1) night trading session, slated for launch by the fourth quarter of 2021, is anticipated to significantly enhance the attractiveness and global participation in the Malaysian derivatives market. This strategic move is expected to boost trading activity periodically each quarter, providing traders with expanded opportunities to engage with crude palm oil futures (FCPO) trading, particularly during the concurrent trading hours of the Chicago Board of Trade’s soybean oil market. The initiative aims to make the Malaysian derivatives market more appealing to international traders and to improve the overall pricing of its offerings.
Increased Global Participation and Trading Volume

The implementation of the night trading session is projected to draw a larger pool of market participants from across the globe. This increased accessibility is designed to foster greater engagement with Malaysian derivatives. In 2020, the derivatives market already demonstrated robust growth, with the total number of contracts traded rising by 35 per cent to 18.2 million, up from 13.5 million in 2019. Foreign participants played a substantial role, accounting for 46 per cent of the total trading volume in that year, indicating a pre-existing appetite for international engagement.
Expanded Trading Opportunities and Exposure

The new T+1 night trading session will offer traders enhanced opportunities to gain exposure to crude palm oil futures (FCPO). Specifically, it will allow participants to trade while the soybean oil market on the Chicago Board of Trade is active. This synchronisation of trading windows is expected to create a more dynamic trading environment, enabling traders to react to global market movements and potentially capture arbitrage opportunities more effectively.
Improved Pricing and Market Enhancement

Beyond merely increasing volume, the night trading session is intended to refine and enhance the pricing mechanisms within Bursa Malaysia Derivatives’ offerings. By extending trading hours and attracting a broader base of international participants, the market is expected to achieve more robust and representative price discovery for its derivatives contracts. This enhancement is crucial for maintaining competitiveness in the global financial landscape and attracting sophisticated trading desks.
Record Trading Activity Preceding Initiative

The anticipation surrounding the night trading launch is underscored by recent record-breaking trading volumes. On June 30, 2021, the total monthly trading volume for the FCPO reached an all-time high of 1.7 million contracts. This surpassed the previous record of 1.66 million contracts traded in March 2020, demonstrating a growing interest and activity level in the FCPO market even before the introduction of extended trading hours.

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What impact will night trading have on Malaysian derivatives market attractiveness?

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