Bank Negara Malaysia’s (BNM) warning against ringgit futures trading in Singapore is meant to curb speculation, but market demand is fuelling the interest in the trades of the local unit.
Malaysia’s central bank on Wednesday criticised the Singapore Stock Exchange (SGX) and the Intercontinental Exchange (ICE) for introducing ringgit futures trading, which BNM said was “inconsistent with Malaysia’s foreign-exchange administration (FEA) policy and rules”.
Malaysia has reiterated that the ringgit remains a non internationalised currency, and any offshore trading of the ringgit — whether as a non- deliverable forward (NDF) traded out of offshore financial centres or as futures, options and other derivative contracts outside of Malaysia — is against the national policy.
Oanda Corp head of trading for Asia Pacific Stephen Innes said it appears the central bank remains vigilant on speculative activity related to the ringgit.
“But it’s the market makers and speculators who provide liquidity. So without that market element, ringgit liquidity via onshore liquidity remains a concern,” he told The Malaysian Reserve.
SGX and ICE have not made any statement over BNM’s warnings.
Innes said the SGX’s introduction of ringgit futures trading was due to demand from the international community for ringgit-denominated currency hedges.
“Most certainly SGX and ICE could provide a more vibrant marketplace for ringgit hedges and would attract more investors back into ringgit capital markets, which is a good thing. A regulated exchange is where these products should be trading, and I hope all parties involved will keep the discussion open,” he said.
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