By Angus Whitley and Liza Lin
Aug. 11 (Bloomberg) -- CME Group Inc., the world’s largest futures market, and Bursa Malaysia Bhd. plan a minority share swap to promote trading of palm-oil contracts outside the Southeast Asian nation.
CME will own a “very small” stake in a new unit of Bursa Malaysia, the nation’s stock exchange operator, CME Chief Executive Officer Craig Donohue said in an interview today. In return, Bursa will take a smaller stake in the larger Chicago- based company, Donohue said. An agreement should be reached in “several weeks,” he said.
CME is tapping demand for palm oil trading outside Malaysia, the world’s second-largest producer of the edible commodity. An agreement allows Bursa to promote dollar denominated palm oil futures, which were introduced last year.
“This product will continue to expand,” Donohue said in Kuala Lumpur. “Palm oil is increasingly utilized.”
The size of share swap transaction “won’t be material,” he said, declining to give the value of the planned investments by each company.
Bursa fell 0.8 percent to 8.24 ringgit at 11:58 a.m. on the Kuala Lumpur stock exchange after being suspended for the announcement. The shares have jumped 60 percent this year. CME, which has climbed 36 percent this year, fell 1.1 to $282.93 in Nasdaq Stock Market composite trading yesterday.
Under the planned revenue-sharing partnership, dollar denominated palm oil futures will be listed on CME Globex, CME’s electronic trading platform, the companies said in a joint statement today.
Palm oil for October delivery dropped 0.3 percent to 2,394 ringgit ($681) a metric ton on the Malaysia Derivatives Exchange, a unit of Bursa. The dollar-denominated contract hadn’t traded today.
The collaboration will also involve trade-matching services and product licensing, according to the statement.
To contact the reporter on this story: Angus Whitley at awhitley1@bloomberg.net
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