Bursa Gold Futures to keep margin rates for now despite gold price rally

Publish date: Mon, 15 Apr 2024, 08:03 AM

KUALA LUMPUR: Bursa Malaysia Bhd will keep margin rates for Bursa Gold Futures for now, despite the sudden surge in gold prices which led one exchange to increase margin rates.

The Gold Futures (FGLD) is a US Dollar denominated and ringgit settled gold futures contract traded on Bursa Malaysia Derivatives designed to provide market participants with exposure to international gold price movements.

Bursa Malaysia told Business Times that there is no change to the RM3,200 initial margin requirement for Bursa Malaysia Derivatives FGLD offering for now.

In response to queries from Business Times, Bursa Malaysia clarified that adjustments to margin requirements for FGLD are not solely influenced by price fluctuations.

They also consider factors like price volatility, correlations between different instruments, and market forecasts.

Under the FGLD contract, any changes in margin requirements are determined using the SPAN (Standard Portfolio Analysis of Risk) margin system. "This system is widely adopted by futures and options exchanges for calculating margins based on the aforementioned factors," the local bourse told Business Times.

Bursa Malaysia Derivatives will promptly inform trading participants of any updates to margin requirements.

Last Friday, the Shanghai Gold Exchange said it will raise margin requirements for some gold futures contractsfrom tomorrow (April 15).

This was after spot gold was up 0.9 per cent at US$2,395.56 per ounce, bullion hit a record high of US$2,398.49 and U.S. gold futures gained 1.7 per cent to US$2,413.00 on Friday.

The Shanghai Gold Exchange will raise margin requirements for gold futures contracts to 9.0 per cent from 8.0 per cent.

Bernama reported that the volume of gold futures in the local market fell to 40 lots from 198 lots in the previous week while open interest declined to 44 contracts from 75 contracts a week ago.

On a Friday-to-Friday basis, the April 2024 contract rose to US$2,402.4 per troy ounce from US$2,297.10 and May 2024 increased to US$2,418.2 from US$2312.90 last week.

As for the Bursa Gold Dinar (BGD) introduced earlier this year, Bursa Malaysia said that the platform offers a straightforward way to buy and sell physical gold.

"Unlike traditional equities and derivatives markets, which often require margin (a partial upfront payment), BGD operates on a cash-on-delivery basis. "This means investors pay the full amount for the gold purchased upfront, ensuring a clear and transparent transaction," said Bursa Malaysia.

Bursa Gold Dinar prices are dynamic and reflect real-time market conditions, it added.

999.9 or 24 karat gold was trading at RM364.86 a gram as at Friday.



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