Bursa Malaysia Bhd (1818) has agreed, after over a year of negotiations, to sell a 25 per cent stake in its derivatives unit to CME Group Inc, the world’s largest derivatives exchange.
The stake sale, expected to be concluded before year-end, is part of a strategic partnership to help globalise Malaysian crude palm oil (CPO) and grow the local derivatives market further.
The stake will cost CME about RM55.6 million, which it will pay for with RM1.9 million in cash and the rest in CME stock comprising 76,427 shares.
Bursa is set to make a gain of about RM44 million from sale in the unit, Bursa Malaysia Derivatives Bhd.
The exercise will result in Bursa owning a “very small” stake in CME, chief executive officer Datuk Yusli Mohamed Yusoff (pic) said.
The Chicago-based CME, which has a market capitalisation of over US$20 billion (RM69 billion), was first known to be in talks with Bursa from as far back as December 2007.
Yusli said trading volumes for the Malaysian derivatives business, which currently average about 26,000 contracts per day, are expected to double in three to five years, following the partnership.
He expects the derivatives business to account for 30 per cent of Bursa’s total revenue in three years, from 15 per cent now.
“CME’s reach, expertise and track record provide us with a springboard to take our established positions in the derivatives market to greater heights of success,” he said at a joint news briefing with CME officials in Kuala Lumpur yesterday.
For CME, the partnership allows it to further penetrate and expand its products and services in Asia, where the derivatives industry is enjoying “a robust stage of growth”, CME managing director for Asia, Wong Chong Fatt, said.
In order to strengthen Malaysia’s position as the global price benchmark for CPO, Bursa will license to CME the right to use settlement prices for its ringgit-denominated CPO futures contract.
This will provide for the development of US dollar-denominated cash-settled CPO futures contracts and related options to trade on one of CME’s US designated exchanges. These, in turn, will be traded on CME’s trading platform, CME Globex, which is the most widely distributed electronic trading platform in the world.
In addition, the collaboration will see the listing of all existing and future Bursa Malaysia Derivatives products on CME Globex.
Bursa is expected to list all its derivatives products on CME Globex in the second half of 2010, Yusli said.
“This effectively means greater access and reach for the Malaysian derivatives market, which in turn will benefit local brokers in the long term,” said the Malaysian Futures Brokers Association’s president, Steven Lai.
Bursa’s shares, which were suspended yesterday pending the announcement, closed 3 sen higher to RM7.83 on Wednesday. They will resume trade today. Source : Business Times by Adeline Paul Raj
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