BURSA MALAYSIA DERIVATIVES BERHAD (BMD) GOLD FUTURES Product & - - PowerPoint PPT Presentation

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BURSA MALAYSIA DERIVATIVES BERHAD (BMD) GOLD FUTURES

Product & Market Development Bursa Malaysia Derivatives Berhad

Ongoing investigations into unsustainable gold schemes involving public money:

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• http://www.bnm.gov.my/microsites/fraudalert/

0301_status.htm

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• Shortage of the precious metal and

concerns about the US recession

• Dollar was mostly lower on the world

currency market

• US economy making quicker

recovery than expected

• Dollar stage a broad retreat, undercut by

falling interest rates and renewed concern abroad about the stability of American banking system

• India imports gold more than doubled to $7.5 billion in

Apr from $3.1 billion in the corresponding period, trade deficit widens on imports and low export growth

• World economy depression

and US subprime crisis

• Prices fell, longest run of monthly declines in 16

years

• No longer the preferred asset as economic

condition show signs of improvement

• Gold price

rebound from 34 month low

• n physical

demand after slump

A Brief History of Gold Prices (1980 - Sept 2013)

USD Source : Bloomberg

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Gold Prices From January – September 2013

International markets – FT 16 April 2013

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Gold Price Drop in April 2013: Asian Retail customers rush to buy gold

IN INDIA: IN THAILAND

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What is Futures Contract?

• A futures contract is an agreement to buy
• r sell an asset at a certain time in the

future for a certain price

GOLD CONTRACT SPECIFICATIONS

Underlying Asset Based on London Fix Gold Specifications Settlement Method Cash Settlement Contract Size 100 grams Price Quotation Ringgit Malaysia per gram

Minimum Price Fluctuation RM0.05 per gram (or RM5 per tick). Example: RM140.00, RM140.05, etc. Daily Price Limit

• +/- 10% of settlement price of preceding

Business Day

• Trigger: spot month – 10 minutes cooling
• ff period followed by 5 minutes

interruption (including pre-opening process)

• Revised to +/- 20%

Speculative Position Limit 25,000 contracts or 2,500 kgs

GOLD CONTRACT SPECIFICATIONS (Page 2)

Trading Hours Monday to Friday Trading Sessions: 0900 – 1230 hours 1430 – 1900 hours Contract Months Current month, next 3 months and any February, April, June, August, October and December falling within a 12 month period beginning with the current month.

GOLD CONTRACT SPECIFICATIONS (Page 3)

Last Trading Day (“LTD”) Last common Business Day of the contract month in both London and KL. Final Settlement Price (“FSP”) Gold Reference Price London AM Fix (USD/troy oz) on the Last Trading Day adjusted for conversion into RM/gram. USD/RM conversion rate 1700 hours middle rate published on the Last Trading Day on the Bank Negara Malaysia website. Conversion from Troy Ounce to Grams 1 troy oz = 31.1035768 grams Rounding Up/Down: FSP to be rounded to the nearest RM0.05

GOLD CONTRACT SPECIFICATIONS (Page 4)

Why trade BMD’s Gold Futures -

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• 1. Leverage – 8% margins
• 2. Provides transparent and regulated environment
• 3. Shorting ability
• 4. Competitive prices from market makers
• 5. Quoted in Ringgit Malaysia

What Bursa’s Gold Futures are not -

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• 1. Physical gold market
• 2. Loco-London gold market

Bursa’s Gold Futures are -

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• 1. Contracts with expiration, e.g., Sep 13, Oct13, etc.
• 2. Cash Settled against Loco-London A.M. Fix prices
• 3. Only available through BMD’s brokers
• 4. Marginable – about 8% of contract value
• 5. Daily marked to market

Buyer A Seller B BMD Clrg Hse Buyer A Seller B

The Basics of Novation and Multilateral Netting

Before Novation After Novation

A Short 2 Long 1 C Short 1 Long 2 D Short 1 Long 2 B Short 2 Long 1

Without Netting

A Net Short 1 C Net Long 1 D Net Long 1 B Net Short 1

With Netting

CHse

City/Date March April 28 29 30 31 1

Kuala Lumpur





Sat Sun 

London

 X (Good Friday) Sat Sun 



Business Day



Non Business Day

• Last Trading Day
• Final Settlement Price
• Trade Restriction
• Other Contract Months Remained Traded
• New Contract Listed

March 2013 contract

Gold Futures Contract Months Example

Oct 13 Nov13 Dec 13 Jan 14 Feb14 Apr14 June14 Aug14

Current Date: 1st Oct 2013

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