Smart Investor Malaysia

Volatility a Boon for Derivative Markets


Markets in a continuous state of flux will offer more trading opportunities for futures traders.

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While investors remain jittery about the prospects of increased volatility and uncertainty in the capital markets this year, futures traders welcome markets that are in a continuous state of flux.

In fact, futures traders “strive on volatility”, says Azila Abdul Aziz, the CEO and executive director, head of listed derivatives, of Kenanga Futures Sdn Bhd.

“Basically, derivative markets want volatility, that’s where all the trading opportunities present itself,” she tells Smart Investor.

Azila also says Malaysia’s derivatives market still has much room for expansion as the market is still largely untapped. “At Kenanga Futures, we aim to grow this niche market and make it mainstream.”

Here are excerpts of our recent interview with Azila.

Smart Investor: What are your expectations with regard to the outlook for the local derivatives market?

Azila Abdul Aziz: The glass is half full, and there is vast potential for the Malaysian derivatives industry to continuously attract liquidity, technology and to bring other tools to grow above and beyond the natural local market situation.

Azila Abdul Aziz

The market is largely untapped and we believe more can be done to expand the knowledge sharing and capacity building in the area of derivatives expertise. At Kenanga Futures, we aim to grow this niche market and make it mainstream. We laud the Securities Commission’s (SC) efforts on introducing the Marketing Representative (MR) framework and hope more marketing and promotional initiatives can be worked on together between SC and us to jointly promote this to the mass public.

On product knowledge for the masses, we are continuously engaging with Bursa Malaysia in organising joint programmes for product workshops and seminars to further educate the public on how to apply and use the derivatives concept in their trading and investment portfolios. Once more knowledge is acquired, the individual will be better informed to make decisions on their portfolios and optimise the returns.

Derivatives in itself is a unique instrument. Its ability to be used actively by our clients in both uptrend and downtrend markets clearly defines its flexibility.

The MR structure will help the industry to reach out to more people. MRs are non-licensed but registered with a licensed broker as registered personnel to introduce and bring over the potential clients to meet the licensed brokers. They will be incentivised according to the respective agreed packages. The aim is for the term “MR” to be as common and familiar to the public, just like the term “Unit Trust Agent”. We must make the unfamiliar, familiar.

How will market volatility, economic headwinds, geopolitical risks and other similar news impact trading in the derivatives market?

Futures traders strive on volatility. They move in swiftly, analyse and make a decision on where he/she thinks the direction it will go to next.

Traders thrive on “hot” news and hope to make quick profits and enter the market first before others get wind of the information. Basically, derivative markets want volatility, that’s where all the trading opportunities present itself.

For example, if the news is broadly negative, the expected impact would naturally be a sell-down in the market. So what is the best way to follow this trend? Sell futures. As the price drops, choose a point to buy back and close the earlier futures position that you had sold. Trade done!

Most clients are guided by the technical charts to establish their entry and exit points. For Kenanga Futures, our trading platform KDF TradeActive™ helps our clients to make those decisions.

For 2020, what are Kenanga Futures’ planned offerings that will enable clients to participate and capture more trading opportunities in derivatives?

Our aspiration is to build a Smart Derivatives Trading Community in Malaysia where we continue to engage, educate and experience with our clients and prospects. In the same vein, we undertake the journey of helping clients with zero knowledge about derivatives to becoming sound in both product and regulatory knowledge.

To achieve that, we have a variety of active learning programmes lined up in 2020 that includes seminars, webinars and personalised coaching sessions for our clients to build the foundation on derivatives.

We have created a dedicated website my for our retail customers to easily access Daily Research, articles, market reports as well as important links that could help them learn and trade more.

We are pleased that the participants at our annual trading campaign (Back To The Futures) has steadily grown over the past three years which reflects the higher confidence and comfort level towards derivatives. We are now planning to offer a more exciting campaign in 2020.

At the same time, our established business relationship with our global clients is continuously managed, to provide the best services as possible. We work closely with industry associations and related agencies, for us to be kept abreast on market changes to facilitate the needs of our clients and ensure smooth trade transactions throughout the year.

Is there a need to expand product offerings for the listed derivatives market in Malaysia?

The list of available product offerings are extensive and I believe that our community has yet to experience trading all of them. On matters related to trading in specific exchanges, the public may refer to SC or Bursa Malaysia via their official channels.

In Malaysia, generally retailers will trade the indices (FKLI and FM70) and commodity-based FCPO.

The FKLI and FM70 futures contracts would be more familiar to them as they naturally progress to be elevated to “Intermediate Level” traders using futures contracts from previously as just a passive investor with a “long only” strategy (only buy Malaysian stocks and passively wait for the price to increase).

Those who want to explore further to non-equity based products will venture to trade the Crude Palm Oil Futures contract (FCPO). The public are inquisitive and always looking for new ideas or strategies. In terms of listed derivatives offerings for the Malaysian retailers, the access is already available for them to explore.

Let’s say they intend to start trading with Malaysian listed derivatives. They will trade FKLI, FM70 and FCPO. As they feel more comfortable, they possibly can expand to trade Asian listed derivatives, for example the Hong Kong Index or the Hang Seng China Enterprise Index that is available from Hong Kong.

As their trading experience progress further, they now want to go global, they can consider to trade the US derivatives markets. They can refer to the Chicago Mercantile Exchange (CME) to trade international listed derivatives.

At Kenanga Futures, we can assist on this as being part of Kenanga Investment Bank Bhd, we can provide customers a more holistic approach to their financial needs. We look forward to more robust and active trading in derivatives for 2020!

For further enquiries about Kenanga Futures, please visit

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