Bursa Malaysia Derivatives - 4

Institutional brokerage firm like KAF-Refco brought me in to work at the cpo futures trading desk as the company's floor trader from a typical Chinese physical cum futures brokerage firm called Convest; I was joining KAF-Refco ambitiously in believing they had a complete mathematical system that would probably have made them wildly rich. As I can recall, a well known palm oil analyst cum broker, G.M. Teoh, was also in the trading team, handling millions of ringgits worth of contracts for clients.

Thought they were serious and smarter than everyone else in the market by bringing more professional in full technical advantages on hand signals, the madness had actually turned the cpo futures trading pit into a "madhouse" until there were some floor traders in the forties dared not do trades! Whenever they went near to the pit, they felt they were risking their lives!!! They were so worried to make errors to fill a contract of cpo futures, be it the price or contract month! A kind of phobia in trading and preferably stayed in their own booths. 

Any way, the hoo-ha from KAF-Refco lasted less than one and a half years, I joined the last batch of the new "Locals" in KLCE open out-cry cpo futures trading. Many of whom enrolled were former trading clerks and trading floor employees knew well the risk and reward in trading cpo futures and wished to make their own first gold pots from such a risky trade that easily made or lose thousands in a day for a small trader.

Knowing trading cpo futures was so intoxicating, many never thought of learning how to survive and always forgot the simple theory in trading success like "cut loss fast, let profit run", including me!   

Bursa Malaysia Derivatives - 3

Technology has made a deep impact on futures trading, open out-cry trading on crude palm oil futures trading generated an average much below 2000 contracts a day when I was still a runner in the cpo futures trading pit in KLCE but electronic trading can help generating more than 2000 contracts in just a few seconds in cpo futures trading presently.

I still remember the chaos day that open out-cry cpo futures trading volume hit 5000 contracts when I was a trader in a newly set up futures company called KAF-Refco, we did 3000 contracts that day! Since the trading copy, as mentioned in previous post, had its limitation by not exceeding 20 contracts per copy (under the KLCE rules), just imagine how many copies would have been raised for the 5000 contracts traded that day! We floor traders had to sort out all the trading copies for more than 3 hours after the cpo futures market was closed at 6pm! 

30,000 open positions was basically at the high end in open out-cry trading but electronic trading has the open positions hit 280,000 before coming down to about 180,000 when this post is written.

As we all know that Locals in cpo futures trading are the speculators but also the market makers. In open out-cry trading, they were the pits traders jumping up and down "insanely" in outsiders' eyes who stood at the 5th floor Gallery watching down the big trading floor on all kinds of hand signals and body gestures in a very noisy environment in DayaBumi Complex.

Today, there is no more such a marketplace. Locals sit in cosy rooms finger press on their keyboards to do trades... no longer jumping up and down with hand signals!

Bursa Malaysia Derivatives - 1

Bursa Malaysia Derivatives has become one of the international market place on futures trading benchmark in our global economic system especially on the crude palm oil commodity futures trading which was lunched in early 1980s. By doing a Google search on KLCE, MME, COMMEX, KLOFFE, MDEX and BMD, it is believed that readers will be able to find the history and the "evolution" of Bursa Malaysia Derivatives.

However, the Exchange itself and the speculators who help run them remain largely misunderstood, general thinking, they served no useful function other than a gambling pool being specially set up for those tyranny big boys!

In my first thought, this was actually considered to be a meeting place for gamblers - professional gamblers !!! It was especially true when I first stepped in the pit where the open-outcry crude palm oil futures trading floor located in the Dayabumi Complex near Merdeka Square, Kuala Lumpur in mid 1990s.  

The Exchange had since been transformed into a sophisticated electronic trading market place (year 2000) and partially owned by one of the world largest and busiest Exchanges. You may call it a licensed casino, but the Exchange itself is the real free and "regulated" market place where speculators serve a very important function helping the Exchange to be a well-known "licensed casino", making sure every buyer and seller is part of a pair like socks we wear that creates volumes.

With all the sounds, friends and chaotic trading activities I had missed in KLCE in 1990s, I wish there is a time machine that bring me and you back to learn the "hand signals" to make a trade like other speculators did - they were the "Locals". 

They are the speculators with a mindset of high risk high return, make fortunes or end up broke!