Thursday 28 Mar 2024
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KUALA LUMPUR: Bursa Malaysia plans to launch a syariah-compliant commodities trading platform by the middle of next month, which may see transactions of up to RM1 billion daily.

The platform — Commodity Murabahah House (CMH) — will be a multi-commodity, multi-currency trading platform to facilitate syariah-based financing and liquidity management.

Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff said CMH would be the first Internet platform in the world with crude palm oil (CPO) as its underlying asset and also the first to be fully syariah-compliant.

“This venture brings two of the nation’s main global players; namely the Islamic banks and CPO producers together, to further enhance the country’s visibility on the world stage,” he said at the signing of a memorandum of participation between the stock exchange, four plantation groups and 24 financial institutions here yesterday.

The platform is essentially a money market instrument for financial institutions to manage their short-term liquidity requirements. These syariah-based tools require that there be a real physical underlying asset to the financing.

Among the plantation signatories were Boustead Estate Agency Bhd, Genting Plantations Bhd, IOI Corporation Bhd and Sime Darby Holdings Bhd.

The financial institutions included Gulf Cooperation Council (GCC) banks Al Rajhi Banking & Investment Corp (M) Bhd, Asian Finance Bank Bhd, Kuwait Finance House (M) Bhd and Unicorn International Islamic Bank Malaysia Bhd as well as the major local and foreign Islamic and conventionl banks, and a futures broker.

The platform will facilitate transactions under the syariah principles of murabahah, tawarruq and musawwamah.

Mooted two years ago, the platform is a collaboration between Bank Negara Malaysia, the Securities Commission of Malaysia, Bursa Malaysia and market players under the Malaysia International Islamic Financial Centre initiative.

Bursa Malaysia global head, Islamic markets, Raja Teh Maimunah Raja Abdul Aziz, said a trading volume of RM1 billion daily would be comparatively small given that a single GCC bank was capable of undertaking such transactions to the tune of US$5 billion (RM17.6 billion) daily.

According to a Reuters report, this could potentially serve a US$100 billion market.

She said such instruments in the Middle East had previously used many different commodities largely traded on the London Metal Exchange and included even cars and mobile phones as the underlying assets.

More important and being the first dedicated electronic platform for such trading, CMH would also be the first to offer full syariah compliance end-to-end, of which none exists at the moment.

Raja Teh Maimunah said CMH would try to differentiate itself as the commodity murabahah principle, itself had come under scrutiny because of some dubious trades.

“We ourselves (the stock exchange) will carry out intermittent audit on our suppliers and we will ensure that those who come to offer their goods to us actually have the goods to sell.

“Because in syariah banking you cannot short sell, you cannot sell what you don’t have or what you will have in the future. You must sell what you already have, and this is why this house will differentiate itself from anything else,” she said.

The trading structure has also been informally run through by scholars from four international syariah schools of thought. Initially encompassing only locally-based banks, the trading platform could be expanded internationally early next year.

Yusli said the reason for this was to ensure sufficient physical assets “to go international” and a range of hard commodities, other than CPO, would also be offered later.

This article appeared in The Edge Financial Daily, July 29, 2009.

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