Malaysia seeks emollient effects of trading Bursa Malaysia is allowing futures brokers to establish branch offices and 'trading kiosks' anywhere in the country, including Borneo, above It might seem a stretch, but residents of the two biggest cities on the Malaysian part of Borneo - more known for its rainforests and palm oil production - have been getting lessons in commodity futures trading. Phillip Futures, a provider of online trading services in Singapore, revealed last week it had been giving seminars in Kuching and Kota Kinabalu as it tried to expand the appeal of futures beyond banks and big electronic trading groups to the average investor. Phillip also received a licence from Bursa Malaysia, the country's exchange, to set up a branch in Johor Bahru, a city on the southern tip of Peninsular Malaysia across the strait from Singapore. The idea is to broaden participation in Malaysian futures trading as part of a recent Bursa initiative allowing futures brokers to establish branch offices and "trading kiosks" anywhere in Malaysia. The moves are a sign that even as futures trading volumes in the west are anaemic, enthusiasm for the financial instruments is growing in Asia. For Phupinder Gill, chief executive of CME Group, operator of the largest US futures exchange, that is a welcome trend. Malaysia is a key element in his strategy to expand CME beyond the US. "Barely 10 years ago we had total top line [revenues] of $500m, and last year $750m of top line came from outside the US - most of that from our London operation," he says. We haven't even begun to scratch the surface of the potential that can be achieved, particularly in Asia. CME has owned a 25 per cent stake in Bursa Malaysia Derivatives, part of the Bursa Malaysia group, since 2009. Its most widely traded product, crude palm oil futures, has since 2010 been available to traders outside Malaysia through CME's Globex electronic system. This arrangement has allowed Bursa to tap into CME's pool of existing customers, boosting the amount of trading in its palm oil futures contracts. Volume was 27 per cent higher last year in such contracts than in 2011. In turn, CME distributes its benchmark US futures products to Bursa's existing customers, and sells proprietary market data to them. The arrangement will get a boost later this year when the US futures regulator is expected to allow US-based traders to access Bursa Malaysia Derivatives through a system known as "direct market access," meaning they would no longer have to go through a local broker in Korea. The arrangement with Bursa is one of a series of alliances that CME has been building in Asia. CME and KRX, the Korean exchange, operate a similar arrangement under which KRX members can trade Kospi stock index futures after hours on the Globex trading platform. Yet it is China that offers the more enticing long-term opportunity, says Mr Gill. "For now and for the next three years, tapping into the alliances and promoting the benchmark products that we have would be the focus on the sales force in the region," Mr Gill says. But I think on a three to five year basis China would be one of the larger opportunities for CME. Chinese futures brokers have been signing up for membership of CME and its rivals, such as Eurex, the German exchange, and NYSE Liffe, the derivatives arm of NYSE Euronext. That is even as trading volumes on the exchanges have been flat of late. "We're seeing a pipeline of firms in various stages of becoming clearing [member] firms, which is highly unusual when you are talking about contraction in the industry," Mr Gill says. Most of those Chinese brokers - such as GF Securities and Nanhua Futures, two privately owned companies - are expanding away from Hong Kong. Mr Gill says that while Hong Kong has previously been talked of as a gateway into China, "what we are seeing from a practical point of view is Hong Kong is actually a gateway out of China for us." The group expects to open a Beijing office by the end of the second quarter, adding to a total Asia staff of 50. Most are based in CME's regional headquarters in Singapore. In coming weeks, CME will boost its capacity to tap into Asia with the launch of a European futures exchange, based in London. That is set up to allow Asia-based traders to deal in their timezone, including futures on the renminbi, which were launched on Globex in February. Like its US and European rivals, CME does not have an exchange or a clearing house in Asia. Yet while Mr Gill does not rule out setting up a clearing house in the region - "depending on the demand" - he says CME can provide clearing from its London-based clearing house in the meantime.