This article first appeared in Wealth, The Edge Malaysia Weekly on May 25, 2026 – May 31, 2026
Azila Abdul Aziz, CEO of Kenanga Futures Sdn Bhd (KFSB), says Malaysia’s futures market has grown steadily, playing a key role in allowing businesses to manage risk by hedging, especially in the palm oil industry. With pockets of opportunity yet to be explored, it is set to expand further.
KFSB is one of the largest futures brokers in the country. Based on its projections, Bursa Malaysia Derivatives’ (BMD) baseline average annual volume — the overall trading volume of the exchange — is expected to rise about 30% to 26.1 million contracts in the five-year period from 2026 to 2030, compared with 20 million contracts from 2020 to 2025.
Meanwhile, the baseline average open interest of BMD is also expected to increase by about 43% to 383,000 from 268,000 in the corresponding period, signalling strong market participation and genuine investor engagement, instead of speculators opening and closing positions within a day.
The projected compound annual growth rate of BMD volume and open interest in the next five years is 3% and 5%, respectively, she adds.
Azila says the growing interest in Malaysian futures coincides with the global boom. The baseline average of the global derivatives market volume from 2020 to 2024 was 84.4 billion contracts, an increase of over 205% compared with the previous five years. The figure is projected to roughly double to 161.7 billion from 2025 to 2030.
The enormous growth in the global futures market is underpinned by Asia’s growth. The region accounted for about 55% of the global volume from 2010 to 2014, and 83% from 2020 to 2024. From 2025 to 2030, it is expected to make up 85% of global volume.
“The market is growing globally, led by big Asian markets such as China and India. Malaysia is also benefiting from that. That’s partly why you saw palm oil [futures] contract volume hit a new high last year,” she says.
The growing futures market also coincides with an uncertain and volatile environment in which businesses are increasingly managing risk through hedging, and traders are looking for opportunities.
As the Malaysian futures market becomes more robust and liquidity improves, foreign participation has also increased. This includes high-frequency trading (HFT) firms that use powerful computers and sophisticated algorithms to execute a very large number of trades in fractions of a second, profiting from tiny price differences that exist momentarily in the market.
Azila says foreign participation in the local futures market is about 60%, which is a healthy level. Of this, the ratio of HFT to non-HFT firms was 40:60 during the pre-Covid-19 period. Post-pandemic, it has been the opposite, with more than 60% of contracts traded by foreign firms executed by HFT companies.
“It shows that the market has become deep enough for them to run these [trading] strategies. HFTs’ participation tightens the bid-ask spread, which encourages more activity,” she explains.
Azila adds that in developed markets such as Japan, HFT firms tend to trade 60% to 70% of the futures market. As such, the over-60% figure in Malaysia is normal, signalling that the local futures exchange is maturing in terms of volume.
Scarcity-based contracts and perpetual futures worth exploring
It is worth noting, however, that 84% of futures contracts traded on BMD in Bursa Malaysia’s financial year 2025 (FY2025) were Crude Palm Oil Futures (FCPO), followed by FTSE Bursa Malaysia KLCI Futures (FKLI) with 15%.
Other products, including Gold Futures, Mini USD/CNH Futures and DCE Soybean Oil Futures, comprised only 1% of the total contracts traded, according to Bursa Malaysia’s 2025 Annual Report.
While Malaysian government bonds have attracted sustained foreign interest since last year, partly aided by the strengthening ringgit against the US dollar, the three-, five- and 10-year Malaysian Government Securities contracts remain thinly traded.
Products launched most recently include the Mini FKLI Futures (FKLM), on Jan 26, 2026, and the DCE Soybean Oil Futures, on March 18, 2024.
Azila says areas that could attract investor interest include scarcity-based futures contracts. These are based on scarce natural resources such as rare earths, which are of strategic importance globally.
As Malaysia is actively developing the rare earth industry, a domestic futures market would not only allow businesses to manage risk via hedging but also provide arbitrage opportunities and price discovery, she adds.
Another area is perpetual futures contracts, which, put simply, are leveraged bets on an asset’s price that never expire. Instead of converging to spot at a fixed date, they stay anchored to spot continuously through a funding rate mechanism. The first perpetual futures were invented by BitMEX, a crypto derivatives platform, in 2016 for the cryptocurrency market.
“Perpetual futures are very popular these days, and it is a growing trend. It doesn’t work for physical commodities; it is more of an innovative product for financial underlying,” she says.
Shariah-compliant futures is another area with the potential to attract the interest of shariah investors and businesses globally, says Azila. She is encouraged by the shariah hedging guidelines released by the central bank and the launch of more shariah-compliant futures products in recent years.
She believes the market can develop further with more financial technology (fintech) brokers entering the market and offering a drop-down menu in their front-end systems for shariah-compliant products, improving investor access and user experience for these offerings.
KFSB is also investing in raising retail market participation, servicing sophisticated individuals who understand derivatives. This is in line with the launch of the FKLM in January this year, designed to broaden investor access and provide a more affordable entry into Malaysia’s derivatives market. The huge potential of the retail market can be seen in countries such as China and India, but investor education takes time.
Azila says retail investors accounted for 30% of the market during the pandemic when people were stuck at home trying various ways to generate income. But the momentum faded post-Covid.
“Institutional players know their positions and build them over time. But for retail investors, once they get burned, they are out. So, our job is to be selective and focus on those who understand derivatives. The retail market won’t go away.”
The most crucial factor contributing to the local futures market’s growth is BMD’s strategic agreement with CME Group, which has been extended to September 2028.
Put simply, the agreement means futures products in Malaysia can be offered through CME for global access. The initiative started in 2010, when the local derivatives market went electronic via CME Globex, the electronic trading platform for CME Group.
The Malaysian futures market has grown steadily since then, says Azila. For it to continue on this path, it is key that the strategic partnership stays in place beyond 2028, she adds. “If we want to grow beyond 2028, that arrangement has to stay. That’s the feedback we have always provided to the bourse.”
CME Group previously held a 25% stake in BMD as part of the strategic partnership. However, Bursa Malaysia Bhd acquired the stake from CME Group Strategic Investments LLC for RM162.47 million in late 2019, according to news reports.
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