A Complete Guide to Commodities & Derivatives Trading in Malaysia

Picture a market where palm-oil cargoes move from estate to exchange in a single click, gold trades through lunch on CME Globex, and retail punters sit shoulder-to-shoulder with global hedge funds. That’s Malaysia today. 

In 2024 alone, traders punched through 22.75 million derivative contracts on Bursa Malaysia Derivatives—up almost 28 % year-on-year. Most of that action came from the country’s signature Crude Palm Oil Futures (FCPO), now 83% of total volume and the de-facto pricing benchmark for the entire palm-oil world.

Why does this matter to you? Because whether you’re a planter hedging next quarter’s harvest, a retail trader looking for inflation protection, or a portfolio manager chasing uncorrelated alpha, Malaysia offers a deep, well-regulated playground with tight spreads, transparent margins, and direct CME connectivity. 

This guide breaks down everything you need to know—regulations, account-opening hacks, contract specs, tax quirks, even the new wave of “green” commodity derivatives.

Malaysian Derivatives Market Performance 2024: FCPO dominates with 83.28% market share

Malaysian commodities & derivatives market

Malaysia’s commodities and derivatives market achieved remarkable growth in 2024, reinforcing its position as a leading trading hub in the region. With new volume records, increased foreign participation, and a strong showing from the palm oil sector, the year marked a turning point in both scale and global relevance.

Strong growth in derivatives trading

Bursa Malaysia Derivatives (BMD) closed 2024 with its highest annual trading volume on record:

• Total contracts traded: 22.75 million
• Year-on-year growth: 27.91%
• Key driver: Crude Palm Oil Futures (FCPO), with 18.95 million contracts traded (+17% YoY)
• FCPO’s share of total volume: 83.28%

Trading milestones also include:

• Highest-ever daily volume: 178,000 contracts (29 May 2024)
• First time exceeding 100,000 average daily contracts (ADC): Reached 106,385 in October 2024

Notably, foreign institutions made up 61.36% of FCPO trading volume in 2024, signalling heightened confidence in Malaysia’s derivatives infrastructure.

Palm oil sector performance

Malaysia’s palm oil sector continued to anchor both the real economy and derivatives trade. Performance highlights for January to October 2024:

• Export volume: 22.30 million tonnes of palm oil and related products
• Export revenue: RM89.39 billion (up 14.5% from the same period in 2023)
• Average crude palm oil price: RM4,047.50 per tonne (up 5.5%)
• Fresh fruit bunch (FFB) yield: 13.94 tonnes per hectare (up 8.1%)

The combination of improved yields, firm global demand, and higher average prices supported stronger producer margins and increased hedging activity on the FCPO market.

Malaysia’s role in global commodities

The combination of strong fundamentals, international participation, and sustainability integration has reinforced Malaysia’s importance in global commodity value chains. 

With Bursa Malaysia Derivatives operating as a price benchmark exchange—especially for crude palm oil—Malaysia is now seen not just as a producer market, but a price-setter.

This trajectory is expected to continue into 2025, supported by:

• Diversification of listed contracts (e.g. soybean oil, mini currency futures)
• Rising institutional flows from global fund managers and commodity desks
• Growing adoption of ESG-compliant trading and certification standards

Malaysia’s derivatives ecosystem is no longer just an access point to local commodities—it is becoming a central node in Asia’s broader commodity trading infrastructure.

Understanding derivatives and their role in commodity markets

Derivatives are financial contracts that allow you to trade on the price of something—without owning the actual commodity. In Malaysia, that "something" is typically crude palm oil, gold, or foreign exchange. 

Whether you're a business trying to manage cost volatility or a trader looking to capture price swings, derivatives are the tools that make it possible.

These contracts are traded on Bursa Malaysia Derivatives (BMD) and clearing is handled by Bursa Malaysia Derivatives Clearing (BMDC), which guarantees that both sides of the trade are honoured, removing counterparty risk.

Unlike physical trading, derivatives offer speed, leverage, and price transparency—without the need for storage, logistics, or insurance. This is why they’ve become a staple for both commodity producers and financial market participants.

Why trade derivatives?

Derivatives serve two main purposes in Malaysia’s commodity landscape:

• Hedging: Used by businesses to manage risk and lock in costs or revenues
• Speculation: Used by traders to profit from short-term price movements

Here’s how different participants typically use the market:

By offering both risk management and trading opportunities, the derivatives market supports everyone from plantation owners in Sabah to global funds trading on CME-linked platforms.

Why derivatives and commodities are closely linked

Commodity prices are volatile by nature—affected by weather, global policy shifts, geopolitical tensions, and supply disruptions. Derivatives offer a way to manage this uncertainty by shifting price risk from those who can’t bear it to those who can.

In Malaysia, this relationship is most visible in the Crude Palm Oil Futures (FCPO) market. As of 2024, FCPO made up 83.28% of all derivative contracts traded on Bursa, making it the core benchmark for palm oil prices across Asia. Physical deals in Malaysia and Indonesia often reference the FCPO price as the base.

That close connection works because of:

• Price discovery: Futures reflect collective market expectations about supply and demand
• Benchmarking: Physical prices are quoted as premiums or discounts to FCPO
• Liquidity: Active markets make hedging more efficient and execution smoother

Arbitrage also plays a vital role. When the futures and physical markets diverge too far, traders step in to close the gap—buying the undervalued asset and selling the overvalued one. This keeps both sides of the market in alignment.

In short, Malaysia’s commodity derivatives market isn’t just a financial overlay—it’s tightly interwoven with how the real economy prices, produces, and trades essential goods like palm oil. And in a market shaped by volatility, regulation, and global flows, that makes derivatives indispensable.

How Malaysia’s derivatives market is built

Malaysia’s commodity derivatives ecosystem is built on a tightly integrated framework that ensures market integrity, accessibility, and resilience. From exchange operations to clearing systems and regulatory enforcement, every part of the architecture plays a role in enabling seamless, secure, and scalable trading.

Bursa Malaysia Derivatives: The core exchange

Bursa Malaysia Derivatives (BMD) is the central marketplace for all listed futures and options contracts in Malaysia. It operates under the supervision of the Securities Commission Malaysia (SC) and is governed by the Capital Markets and Services Act 2007.

A major turning point came in 2009 when BMD entered a strategic partnership with the Chicago Mercantile Exchange (CME), allowing its products—such as FCPO and FMG5—to be traded globally via the CME GLOBEX electronic trading platform. This move enabled round-the-clock access for international participants, especially during overlapping hours with the US and European markets. 

In a recent announcement, Bursa Malaysia confirmed that it has extended its strategic partnership with CME Group until September 2028.

Key features of BMD:

• Trading hours: Day session (8:30 AM–6:00 PM), After-Hours (T+1) session (9:00 PM–2:30 AM, Mon–Thu)
• International connectivity: Full integration with CME GLOBEX
• Risk safeguards: Real-time surveillance, price limits, and volatility control mechanisms
• Recognition: Named "Exchange of the Year – Commodities" and "Exchange of the Year – Sustainability" at the 2023 FOW Asia Capital Markets Awards

Bursa Malaysia Derivatives Clearing (BMDC): Clearing & risk

Every trade on BMD is guaranteed by Bursa Malaysia Derivatives Clearing (BMDC), which acts as the central counterparty (CCP) for all contracts. Its primary role is to ensure that trades are settled and honored, removing the risk that one party might default.

BMDC uses the SPAN (Standard Portfolio Analysis of Risk) methodology to calculate margins—assessing not just individual positions but entire portfolios to reflect true exposure. This approach recognises offsetting positions and correlation benefits, giving participants more efficient capital usage.

Notable highlights:

Zero clearing fund utilisation in 2024—demonstrating robust default protection systems.

Participant types:

General Clearing Participants (GCP): Can clear trades for themselves and clients.

Direct Clearing Participants (DCP): Clear only proprietary trades

Oversight by Securities Commission Malaysia (SC)

The Securities Commission Malaysia serves as the principal regulator for derivatives and capital markets. Since the 1997 merger of the Securities Commission and Commodities Trading Commission, the SC has governed both financial and commodity derivatives under one unified framework.

Regulatory priorities include:

• Licensing of brokers and Futures Broker Representatives (FBR)
• Market supervision and compliance
• Product innovation and investor protection

Recent regulatory developments:

• Multi-Factor Authentication (MFA) for online trading platforms mandated under Circular 8/2025, effective May 2025
• Introduction of USD Used Cooking Oil FOB Straits Futures (FUCO)—a sustainability-linked product supporting Malaysia’s green commodity ambitions

Who trades in Malaysia’s derivatives market?

Malaysia’s derivatives market supports a diverse mix of participants—ranging from commodity producers to algorithmic traders. Each group plays a distinct role in providing liquidity, managing risk, and enabling price discovery.

This diversity creates a healthy ecosystem where commercial users can reliably hedge their exposures, while liquidity providers ensure that prices remain efficient and reflective of real-time global sentiment.

Core commodity contracts traded on BMD

Bursa Malaysia Derivatives (BMD) offers a focused suite of contracts that serve as essential risk management tools for commodity producers, exporters, and financial market participants. 

While BMD supports a range of agricultural, precious metal, and financial derivatives, the exchange is overwhelmingly driven by one flagship product: crude palm oil.

Agricultural derivatives: palm oil and beyond

The Crude Palm Oil Futures (FCPO) contract remains the cornerstone of Malaysia’s derivatives market. First launched in 1980, it has since grown into the most liquid CPO futures contract in the world and functions as the global price benchmark for palm oil. 

Each FCPO contract represents 25 metric tonnes of crude palm oil and is physically deliverable under the Malaysian Sustainable Palm Oil (MSPO) certification—making it the world’s first commodity derivative contract with a built-in sustainability requirement.

In 2024, BMD expanded its agricultural offerings with the introduction of the DCE Soybean Oil Futures (FSOY) contract. FSOY provides USD-denominated exposure to Chinese soybean oil prices and settles in cash based on the Dalian Commodity Exchange benchmark. This addition allows market participants—particularly exporters and traders in the edible oils complex—to hedge cross-commodity and regional price risk more effectively.

Precious metals and financial derivatives

Malaysia’s listed gold futures contract, FGLD, offers ringgit-denominated exposure to gold through a cash-settled, 100-gram contract. Its smaller size makes it accessible to a broader range of investors and traders, without the complications of physical delivery. The contract is designed to move in line with international gold prices, providing local investors with a practical tool for precious metals exposure.

On the financial side, BMD offers the FTSE Bursa Malaysia KLCI Futures (FKLI) for equity market exposure, and 3-Month KLIBOR Futures (FKB3) for interest rate risk management. Together, these contracts complement the commodity complex by providing hedging and diversification tools for investors managing multi-asset portfolios.

Trading activity by product (2024)

Bursa’s derivatives volume in 2024 remained highly concentrated in FCPO, with financial and other contracts accounting for smaller but growing shares.

Source: Bursa Malaysia 4Q 2024 and 1Q 2025 Financial Results

Getting started with a futures trading account in Malaysia

How to open a futures account: step-by-step

To begin trading derivatives on BMD, individuals and institutions must open an account through a Securities Commission Malaysia–licensed Trading Participant. The full process typically takes between 2 to 5 working days, depending on the broker’s internal procedures and the completeness of documentation.

Key steps include:

1. Choose a licensed broker — Examples include Maybank Investment Bank, RHB Investment Bank, Phillip Capital, Kenanga Futures, and others listed by the SC.
2. Submit documentation — Includes identification (NRIC or passport), proof of income, risk disclosure forms, and account opening forms.
3. Open a CDS account — Required for derivatives settlement (similar to equity trading).
4. Complete client onboarding — Includes risk profiling and investor suitability assessments.
5. Fund your account and meet margin requirements — Initial margin varies by product.

Foreign investors can also open accounts by contacting local brokers or engaging directly with licensed Futures Broker Representatives (FBRs), often through physical branches or digital onboarding tools.

Practice platforms and trading support

Most brokers offer demo accounts or trading simulators to help new users familiarise themselves with the trading interface before going live. One widely used tool is the Derivatives Trading Simulator (DTS) powered by Quick Suite, which mirrors real-time BMD trading conditions.

Depending on the broker, clients can choose between:

• Online trading platforms — For self-directed order placement
• Voice-based execution — Through assigned Futures Broker Representatives

Traders can access educational materials, real-time price feeds, technical charting, and order book depth—features essential for informed decision-making.

Understanding fees and trading costs

Trading on BMD involves several cost layers: trading fees, clearing charges, and broker commissions. Here's how it typically breaks down:

Ringgit Malaysia (RM) Denominated Product

US Dollar (USD) Denominated Product

*Refer to Bursa Malaysia for full list of Derivatives trading and clearing fees.

Broker commissions vary, often ranging from RM1.50 to RM5.00 per side depending on the broker and client tier. Other potential costs include:

• Stamp duty (rare, but applicable in certain cases)
• Currency conversion fees (for USD contracts)
• Margin financing charges (for leveraged accounts)

Margin requirements and capital exposure

Margin is the amount you need to deposit to open and maintain a futures position. In Malaysia, BMD uses the SPAN system (Standard Portfolio Analysis of Risk) to calculate margin based on the trader’s full portfolio exposure and potential offsets:

• FCPO initial margin: RM7,500 per contract (full margin)
• Intraday traders may be eligible for margin as low as RM1,875 per contract (75% discount)

Eligible collateral includes:

• Cash in MYR or approved foreign currencies
• Approved Malaysian equities
• Physical commodity pledges (under specific terms)

Once a position is open, it is marked-to-market daily. If your losses exceed your initial margin, you will receive a variation margin call, which must be met to avoid forced liquidation. Intraday volatility is monitored in real time, so maintaining excess capital in your account is strongly advised.

Certainly. Here's a dedicated section titled “All derivatives products traded on Bursa Malaysia Derivatives (BMD)”, designed to be included in your guide as a comprehensive overview.

All derivatives products traded on Bursa Malaysia Derivatives (BMD)

Malaysia’s derivatives market offers a focused but diverse range of products that span agricultural commodities, precious metals, equity indices, interest rates, and individual stocks. These contracts are primarily traded through Bursa Malaysia Derivatives (BMD) and cleared via Bursa Malaysia Derivatives Clearing (BMDC).

Here is a full list of actively traded contracts as of 2025:

Notes:

• FCPO remains the most liquid contract, representing over 80% of total volume in 2024.
• FSOY is a newer addition (launched March 2024), giving Malaysian traders access to Chinese oil price benchmarks.
• OKLI and SSFs enable more advanced directional strategies and portfolio hedging using local equities.

What’s driving Malaysian commodity prices

Commodity prices in Malaysia—especially for palm oil—are shaped by a mix of local fundamentals, global trends, and policy shifts. 

Supply and demand: Foundation of price movement

At the heart of all price action is the supply-demand balance. In 2024, Malaysia’s palm oil sector saw an 8.1% increase in fresh fruit bunch (FFB) yields, reflecting better estate management, improved labour availability, and favourable weather. 

On the supply side, factors such as replanting cycles, fertiliser use, and land-use policy also directly affect annual production volumes.

Demand continues to grow from multiple fronts:

• Biodiesel mandates in Indonesia and other countries have created a baseline structural demand for palm oil.
• Food and industrial applications remain key, especially from major importers like China and India.
• Global consumption trends, driven by population growth and urbanisation, sustain long-term demand across sectors.

Additionally, the USD-MYR exchange rate plays a significant role in export competitiveness. A weaker ringgit can make Malaysian commodities more attractive globally, while a stronger ringgit may soften export margins.

Weather patterns and policy decisions

Few factors influence Malaysian commodity prices more consistently than weather. The region is vulnerable to both El Niño and La Niña cycles, which can disrupt rainfall and heat patterns—critically affecting yields for oil palm, rubber, and other plantation crops. 

Traders and producers closely monitor updates from the Malaysian Palm Oil Board (MPOB) and global climate forecasting centres to anticipate potential disruptions.

Government and trade policy also act as long-term pricing levers. These include:

• Export taxes and quotas, particularly from Indonesia, which can shift demand to Malaysian suppliers
• Sustainability mandates such as the MSPO certification, which adds a premium for certified products while ensuring environmental compliance
• Regulatory frameworks like the EU Deforestation Regulation, which could restrict market access for non-compliant producers and reshape trade flows

In short, policy creates both constraints and opportunities—pushing the market to adapt to evolving environmental, political, and trade realities.

Managing risk and ensuring Shariah compliance in commodity trading

Effective risk control is central to the integrity of Malaysia’s derivatives market. At the same time, ensuring access to Shariah-compliant investment structures is essential in a country where Islamic finance plays a major role. 

Position limits and systemic safeguards

To prevent excessive risk-taking and concentration, position limits are enforced across all contracts on Bursa Malaysia Derivatives (BMD). For Crude Palm Oil Futures (FCPO), the limits are set as follows:

• 1,500 contracts for the spot month
• 3,000 contracts for any single contract month
• 5,000 contracts across all contract months

These thresholds are designed to balance liquidity for commercial hedging while preventing outsized positions that could destabilize the market.

In addition to position caps, price limits act as circuit breakers during periods of extreme volatility. FCPO contracts are subject to a daily price movement cap of 10%. If three or more non-spot month contracts hit this limit, a 10-minute cooling-off period is triggered. After this pause, the price band may be widened to 15%, allowing the market to adjust gradually under supervision.

The clearinghouse—Bursa Malaysia Derivatives Clearing (BMDC)—monitors all positions in real time. It is empowered to take additional measures during unusual price movements or liquidity shocks, reinforcing systemic safeguards.

Shariah-compliant exposure to commodity markets

Islamic finance principles prohibit interest (riba), excessive speculation (gharar), and non-asset-backed transactions, which raises questions around the permissibility of conventional derivatives. 

However, Malaysia’s Islamic banking sector has developed structured Shariah-compliant alternatives using commodity-based financing methods.

One widely adopted structure is Tawarruq, which involves actual commodity transactions to simulate the economic effect of a derivative position—while maintaining strict Shariah compliance. 

In practice, banks like UOB Malaysia and other Islamic institutions use Commodity Murabahah contracts, often referencing crude palm oil as the underlying asset. These transactions are conducted through platforms such as Bursa Suq Al-Sila’, which provides verified, Shariah-compliant commodity trades.

While direct trading of futures may not be permissible for all investors, these structured products offer a way for Muslim participants to access commodity price exposure within accepted Islamic finance frameworks.

Choosing between local and offshore markets

Malaysian traders have access to both local contracts—like FCPO on Bursa Malaysia—and offshore markets, including the Chicago Mercantile Exchange (CME) or London Metal Exchange (LME). Each offers unique advantages:

Local market benefits:

• Contracts denominated in ringgit (no FX exposure)
• Lower transaction costs for Malaysian participants
• Familiar regulatory environment under the Securities Commission Malaysia
• Deep liquidity in flagship contracts like FCPO

Offshore market considerations:

• Broader commodity coverage (e.g., energy, metals)
• Access to larger institutional order flow
• Extended trading hours across global time zones
• Exposure to USD- or EUR-denominated contracts, which may involve FX and higher capital requirements

Malaysia’s ongoing partnership with CME via the CME GLOBEX platform enables hybrid participation. Traders can benefit from global trading hours while still interacting with the local market infrastructure—particularly through BMD’s After-Hours (T+1) session, which runs from 9:00 PM to 2:30 AM (Monday–Thursday). 

Investing in global commodities through Stashaway

If you're looking to add commodity exposure to your portfolio—without navigating futures exchanges or managing physical deliveries—StashAway Flexible Portfolios offer a practical and user-friendly solution.

Rather than trading local commodity futures like FCPO or FSOY directly on Bursa, StashAway gives you instant exposure to international commodity assets via globally listed ETFs, including those tracking:

• Precious metals (e.g., gold ETFs)
• Energy and agriculture sectors
• Broad commodity indexes

These funds are curated based on liquidity, cost-efficiency, and performance, so you get professionally vetted commodity exposure—all within a single app

To get started:

• Choose a Flexible Portfolio via the StashAway app.
• Select commodity-related ETF assets (e.g., gold, energy).
• Allocate based on your goals—whether hedging against inflation or diversifying globally.

Frequently asked questions (FAQ)

1. What is a derivative in simple terms?

A derivative is a financial contract that derives its value from an underlying asset, such as crude palm oil or gold. In Malaysia, derivatives are used to hedge price risk or to speculate on market movements without owning the physical commodity.

2. What makes FCPO the benchmark for palm oil trading?

FCPO is the most actively traded crude palm oil futures contract globally. It is physically deliverable in Malaysia and requires MSPO certification, making it a reliable reference for global palm oil pricing.

3. How much capital do I need to start trading derivatives in Malaysia?

To trade one FCPO contract, you’ll need to place an initial margin of around RM7,500. For intraday trading, some brokers offer reduced margin requirements (as low as RM1,875), depending on your trading profile.

4. Are foreign investors allowed to open futures accounts in Malaysia?

Yes. Foreign individuals and institutions can open accounts with SC-licensed brokers. Most brokers offer onboarding via online channels or through appointed Futures Broker Representatives.

5. Is derivatives trading Shariah-compliant? 

Conventional derivatives are generally not Shariah-compliant. However, Malaysian Islamic banks offer structured products like Tawarruq and Commodity Murabahah that replicate exposure to commodities while complying with Islamic principles.

6. What happens if I can’t meet a margin call? 

If you fail to top up your account after a variation margin call, your broker may liquidate your position to prevent further losses. This is part of the clearing house’s daily risk management process.

7. What is the difference between FCPO and FSOY? 

FCPO is a physically deliverable futures contract for crude palm oil, denominated in MYR. FSOY is a USD-denominated cash-settled contract tracking Chinese soybean oil prices via the Dalian Commodity Exchange.

8. Are there any tax implications for trading derivatives? 

In general, gains from derivatives may be considered capital gains or business income, depending on your trading activity and tax status. You should consult a licensed tax advisor for specifics.

9. What are the trading hours for BMD contracts? 

BMD operates a day session from 8:30 AM to 6:00 PM, and an After-Hours (T+1) session from 9:00 PM to 2:30 AM (Monday to Thursday) to overlap with global markets.

10. Can I practice trading before using real money? 

Yes. Most brokers offer demo platforms or trading simulators, such as the Derivatives Trading Simulator (DTS), where you can trade using virtual funds and real-time market data.

Glossary of common terms in Malaysian derivatives trading