Banking (Kuala Lumpur Options and Financial Futures Exchange Bhd)

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The Kuala Lumpur Options and Financial Futures Exchange Bhd (KLOFFE), Malaysia's first financial derivatives exchange was launched on 15 December 1995. KLOFFE was established to provide for the growing needs of investors, offering both domestic and international investors and portfolio managers access to effective risk and portfolio management tools not available before.

At inception KLOFE was a 100% subsidiary of KLOFFE Capital, whose shareholders were Renong Bhd, HLG Capital Bhd, New Straits Times Press (M) Bhd and Rashid Hussain Bhd. However, on 22 July 1998, a Sales and Purchase agreement was signed between the Kuala Lumpur Stock Exchange (KLSE) and shareholders of KLOFFE Capital for the purchase of KLOFFE Capital by KLSE for RM35 million subject to a due diligence exercise conducted by the KLSE.

Despite only moderate volumes at inception, average daily volume at the exchange has now risen to close to 4,311 contracts in June 1998. The highest daily volume of 8,557 contracts and highest daily open interest of 33,243 contracts was achieved in June 1998. The Derivatives Liquidity Ratio, representing the ratio of the turnover value of the futures to the turnover value of the component stock, also rose from 11% in July 1996 to 119% in June 1998.

On the home front, KLOFFE has expanded much effort in the areas of marketing and education of the exchange and its products to the public. Among the steps taken include holding regular educational symposiums and presentations for the public as well as companies, and participating in local and international derivative exhibitions.

Internationally, KLOFFE was awarded "Derivatives Exchange of The Year 1996" by the UK-based World Equity Magazine in recognition of its progress despite the challenges faced in the first year of operations. In December 1996, KLOFFE also became a signatory to the Windsor Agreement, upon which KLOFFE is now in a position to apply to be a Recognized Futures Exchange pursuant to the rules of other foreign futures exchanges. KLOFFE has also recently received approval to have its products traded in Australia and Taiwan and is in the process of establishing its distribution channels in the relevant countries.