KUALA LUMPUR: Bursa Malaysia Derivatives Bhd has launched the USD Used Cooking Oil FOB Straits (Platts) Futures Contract (FUCO), with 42 contracts representing 1050 metric tonnes of used cooking oil traded on its first day.
The launch of FUCO follows a licensing agreement with S&P Global Commodity Insights (SPGCI), allowing Bursa Malaysia to use the Platts UCO FOB1 Straits price assessment for the calculation of the FUCO final settlement price.
This represents a significant step for Bursa Malaysia Derivatives as it leverages its strength as a global trading hub for edible oils to diversify its product offerings into the used cooking oil (UCO) domain.
Currently, UCO transactions are primarily conducted on a spot or back-to-back basis, leaving many stakeholders vulnerable to price fluctuations.
FUCO addresses this gap by offering a reliable and transparent platform for price discovery and hedging, helping stakeholders plan their operations and manage risks as the market continues to expand at a rapid pace.
Bursa Malaysia chief executive officer Datuk Muhamad Umar Swift said the global shift towards a sustainable economy has prompted exchanges to align with the evolving investment preferences and hedging needs of market participants.
He added that the interconnectedness between derivatives and underlying markets such as commodities, positions exchanges to steer the transition towards sustainable practices in the physical markets, bringing economies closer to achieving Sustainable Development Goals (SDGs).
"FUCO represents our commitment to innovation and sustainability.
"By offering an effective tool for UCO market players to manage price volatility and capitalise on opportunities in this emerging market, we aim to enhance the resilience of the renewable energy supply chain," he said in a statement today.
Meanwhile, Bursa Malaysia Derivatives director Mohd Saleem Kader Bakas said the rapid growth in UCO collection and refining capacity across Southeast Asia makes the launch of FUCO both timely and highly relevant.
"Malaysia, with its strategic geographical location as a regional trans-shipment hub, is ideally positioned to become the focal point for UCO trading in the region.
"The FUCO contract, which uses FOB Straits pricing, is designed to reflect the market dynamics of Southeast Asia, aligning closely with the needs and trends of the regional biofuel industry," he noted.
Early participation of regional UCO players highlights market confidence in FUCO's function as a price risk management avenue.
FatHopes Energy Sdn Bhd and Mitsusho Sdn Bhd were amongst the first traders to participate in FUCO trading upon its launch.