Gold Futures (FGLD)

FGLD is a small-sized Ringgit Malaysia (“RM”) denominated gold futures contract traded on Bursa Malaysia Derivatives, providing market participants exposure to international gold price movements at a lower entry cost.

The pricing of the FGLD contract in local currency removes the need for Malaysian participants to purchase foreign currency and therefore removing exposure arising from foreign currency fluctuations.

Each FGLD contract is equivalent to 100 grams of gold bullion. The small size has been designed to provide accessibility to all, but also flexibility for those wanting greater exposure. For the retail player wanting smaller exposure, the small size provides affordability. For the industrial user requiring larger exposure, the contract can be traded in multiple lots at a time (e.g. 5 lots, 10 lots etc).

As a cash-settled contract, no delivery of physical gold is required. Instead, the FGLD contract will be settled on expiry using the cash equivalent of the amount of gold purchased (e.g. 100 grams), calculated using the London AM Fix price (in USD) on the final trading day converted into RM.

For example: 

On the Final Trading Day, if the London Gold AM Fix price is USD1,300 per troy ounce and the exchange rate is USD1 = RM3.0800:

1. Conversion of the gold price from USD to RM will be: 1,300 x 3.0800 = RM4,004 per troy ounce.
2. Conversion from troy ounce into grams: RM4,004/31.1034768 = RM 128.731589260786 per gram (1 troy once = 31.1034768 grams)
3. Final Settlement Value will be RM128.75 per gram (rounded to the nearest RM0.05),
4. Contract Value will be RM128.75 per gram x 100 grams = RM12,875.

The London AM Fix price is the global benchmark for spot gold prices, and the settlement of the FGLD contract in accordance with this price characterizes the FGLD contract as an instrument that tracks the international gold market closely.

The final trading day for each FGLD contract will be the last common business day in London and KL. Please refer to bursa website for the final trading day for each contract month.

Contract Specification: http://www.bursamalaysia.com/misc/system/assets/7205/derivatives_commodity_derivatives_FGLD_specification_english.pdf

Derivatives

Derivatives are financial instruments used to manage one's exposure to today's volatile markets. A derivative product's value depends upon and is derived from an underlying instrument, such as commodity prices, interest rates, indices, and share prices.

Derivative instruments can be traded in an organised exchange or over-the-counter (OTC). Futures and options are essentially elementary derivative products mostly traded on exchanges. A futures contract is an agreement between two parties to buy or sell the underlying instrument at a specific time in the future for a specific price determined today.

An option however, provides the holder/buyer the right, but not the obligation, to purchase or sell a certain quantity of the underlying instrument at a stipulated price within a specific time period by paying a premium.

The following 9 products are currently traded on the Exchange:
KLCI (FKLI) Futures
KLCI (OKLI) Options
3 Mth Month Kuala Lumpur Interbank Offered Rate interest rate (FKB3) Futures
Crude Palm Oil (FCPO) Futures
3-Year Malaysian Government Securities (FMG3) Futures
5-Year Malaysian Government Securities (FMG5) Futures
10-Year Malaysian Government Securities (FMGA) Futures
Crude Palm Kernel Oil (FPKO) Futures
Single Stock Futures (SSFs)
Ethylene OTC Futures Contract

(Source : Bursa Malaysia website)