BURSA MALAYSIA DERIVATIVES BERHAD (BMD) GOLD FUTURES Product & Market Development Bursa Malaysia Derivatives Berhad 1
Ongoing investigations into unsustainable gold schemes involving public money: http://www.bnm.gov.my/microsites/fraudalert/ 0301_status.htm 2
A Brief History of Gold Prices (1980 - Sept 2013) USD - 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 -Shortage of the precious metal and concerns about the US recession - Prices fell, longest run of monthly declines in 16 - Dollar was mostly lower on the world years currency market - No longer the preferred asset as economic condition show signs of improvement - Gold price - US economy making quicker - World economy depression rebound recovery than expected and US subprime crisis from 34 month low on physical demand after slump - Dollar stage a broad retreat, undercut by falling interest rates and renewed concern abroad about the stability of American banking system 3 Source : Bloomberg
Gold Prices From January – September 2013 4
International markets – FT 16 April 2013 5
Gold Price Drop in April 2013: Asian Retail customers rush to buy gold IN THAILAND IN INDIA: 6
What is Futures Contract? A futures contract is an agreement to buy or sell an asset at a certain time in the future for a certain price 7
GOLD CONTRACT SPECIFICATIONS Based on London Fix Gold Underlying Asset Specifications Cash Settlement Settlement Method 100 grams Contract Size Price Quotation Ringgit Malaysia per gram
GOLD CONTRACT SPECIFICATIONS (Page 2) RM0.05 per gram Minimum Price (or RM5 per tick). Example: RM140.00, Fluctuation RM140.05, etc. • +/- 10% of settlement price of preceding Daily Price Limit Business Day • Trigger: spot month – 10 minutes cooling off period followed by 5 minutes interruption (including pre-opening process) • Revised to +/- 20% 25,000 contracts or 2,500 kgs Speculative Position Limit
GOLD CONTRACT SPECIFICATIONS (Page 3) Monday to Friday Trading Hours Trading Sessions: 0900 – 1230 hours 1430 – 1900 hours Current month, next 3 months and Contract Months any February, April, June, August, October and December falling within a 12 month period beginning with the current month.
GOLD CONTRACT SPECIFICATIONS (Page 4) Last common Business Day of the Last Trading Day (“LTD”) contract month in both London and KL. Final Settlement Price Gold Reference Price (“FSP”) 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
Why trade BMD’s Gold Futures - 1. Leverage – 8% margins 2. Provides transparent and regulated environment 3. Shorting ability 4. Competitive prices from market makers 5. Quoted in Ringgit Malaysia 12
What Bursa’s Gold Futures are not - 1. Physical gold market 2. Loco-London gold market 13
Bursa’s Gold Futures are - 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 14
The Basics of Novation and Multilateral Netting Before Novation Buyer Seller A B After Novation BMD Buyer Seller Clrg A B Hse
Without Netting A B Short 2 Short 2 Long 1 Long 1 D C Short 1 Short 1 Long 2 Long 2
With Netting A B Net Net Short 1 Short 1 CHse D C Net Net Long 1 Long 1
March 2013 contract March April City/Date 28 29 30 31 1 Kuala Sat Sun Lumpur X (Good Sat Sun London Friday) • Last Trading Day • Final Settlement Price • Trade Restriction • Other Contract Months Remained Traded Business Day Non Business Day • New Contract Listed
Gold Futures Contract Months Example Current Date: 1 st Oct 2013 Oct 13 Nov13 Dec 13 Jan 14 Feb14 Apr14 June14 Aug14 19
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