Derivative houses in Malaysia, including ABN AMRO and HSBC, expect interest rate swap volumes to rocket with the impending launch of three and 10-year bond futures. "This will definitely help," said Aik Sai Hong, treasurer at HSBC in Kuala Lumpur. Hong estimated that average monthly interest rate derivatives trading volumes range from MYR700 million to MYR1 billion (USD185-264 million) and that once the contracts are introduced volumes could swell by 20-35%.
"This is one step further for the development of the market," said Raymond Yeoh, head of financial markets at ABN AMRO in Kuala Lumpur. Market officials said the contracts will boost liquidity in the interest rate swap market and make it easier for firms to hedge positions. An official at another international house said bond futures will aid in spurring product development, including a wider acceptance of interest rate options.
The Malaysian Derivatives Exchange has signaled that it will likely permit the products in the coming months, but has not given a specific timeframe. Hong, however, expects three-year contracts to be introduced within three months, adding that 10 year contracts will take longer. MDEX currently lists five-year bond futures. Sree Kumar, of the strategic planning and product development department at the MDEX in Kuala Lumpur, did not respond to messages.