BFX, Bursa Malaysia agree on trading platform

The Bahrain Financial Exchange (BFX) and Bursa Malaysia said yesterday they signed an agreement to study a common platform on which Islamic finance products such as commodity Murabahas could be traded.

Malaysia's stock exchange launched a platform last year on which Murabaha, an Islamic money market instrument, can be traded using palm oil as the underlying commodity.

Its fragmentation between its two most important regional centres, the Gulf Arab region and South East Asia, is seen as a constraint to the growth of the emerging $1 trillion (Dh3.67trn) Islamic finance industry.

Arshad Khan, Director at Indian exchange operator Financial Technologies – that owns BFX – told a news conference that the two exchanges are studying ways to give Gulf Arab banks access to Bursa Malaysia's trading platform.

"The ultimate objective of this relationship is whether the trade is coming in from any part of the world they don't have to go through two different regulations or two different rules of trading," he said. BFX is set to start operations later this quarter. It will offer trading in both Islamic and conventional products in equities, derivatives, commodities and currencies.

The global daily commodity Murabaha market was estimated to have reached some $100 billion by the end of 2008, and the large banks in the Gulf Arab region are estimated to trade between $3bn and $5bn daily.

Bursa Malaysia is hoping to boost its platform by attracting trading from the Middle East, where banks are significantly larger than in its home market. The platform has seen only few cross-border transactions since its launch.

Raja Teh Maimunah Raja Abdul Aziz, Global Head of Bursa Malaysia's Islamic capital markets, said that regional commodities such as coal and metals could be used instead of palm oil to underpin Murabaha trades through BFX.

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