ICDX to Realise Governments Ambition for Indonesian Commodity Trading

Indonesia Commodity and Derivatives Exchange (ICDX) was officially launched in a Grand Launch event April 6 in Jakarta. ICDX aims to make Indonesia to be the price reference for its commodity products in Asia. Currently, ICDX has 15 broker members and trader members. During the Grand Launch event was officiated by the Minister of Trade, Mari Elka Pangestu, and witnessed by the Chairman of the Commodity Futures Trading Regulatory Agency (Bappebti), Deddy Saleh. The President Director of ICDX, Megain Widjaja also introduced “GOLDGR” product, which is one of the prime products traded on ICDX. GOLDGR is a gold futures contract denominated in Rupiah.

In her keynote address on the Grand Launch event, Mari E. Pangestu said that the presence of ICDX will stimulate the futures trading industry in Indonesia, especially in creating a platform for market participants to perform risk management. Moreover, it is hoped that through ICDX, Indonesia can be the price reference for its own products and not be subjected to the influence of other countries.

The Chairman of CoFTRA, Deddy Saleh also confirmed that in the past, many Indonesian products for example: Crude Palm Oil (CPO), coffee, and cocoa have relied heavily on prices that were formed abroad. Therefore, it is hoped that through the establishment of ICDX, Indonesia can have its own price reference.

On the same occasion, Megain Widjaja, explained that ICDX was established for myriad of reasons closely related with the current conditions in Indonesia. This include the fact Indonesia is home to many prime commodities that are consumed globally. For example, Indonesia is the world’s largest CPO producer, however Indonesia is not the price reference for it. “the time is right for Indonesia to play a significant role in establishing price reference for its local commodities in Asia, and worldwide,” added Megain.

In 2008, the Indonesia CPO’s export value reached US$ 12.4 Billion or able to fulfill 48.4% of the global demand in edible oil. Last year, Indonesia was able to produce 20 million ton from targeted CPO production at 19.4 million ton, an increase from 2008 production at 19.2 million ton. Of the total produced in 2009, 60% of the production was exported. Indonesia definitely has the potential to become the world price reference of CPO.

As an initial step, ICDX – which obtained its license from CoFTRA last 23 June 2009 – will increase public awareness and trust toward commodity futures trading. In addition, it is hoped that ICDX’s presence will encourage market participants to trade domestically as in the past, many participants have traded on offshore markets in the absence of a successful domestic exchange.

In the initial offering, ICDX will focus on CPO and Gold contracts. In the future, ICDX will introduce more products from three large categories of primary commodities. First, is the soft agricultural category which will cover Crude Palm Oil/CPO, coffee, cacao, and the like. Second is the metals which will cover gold, tin, etc. Third is energy which will cover coal, natural gas and crude oil. “Currently, we will focus on CPO and Gold contracts. Our target is to build liquidity in tandem with the growing number of members,” said Megain. The crude palm oil contract, labelled as CPOTR will be launched on April 30 2010, followed by GOLDUD contract.

To accelerate the growth of the futures industry and in order to operate efficiently, ICDX has established PT. Identrust Security International as the clearing house for all ICDX transactions. ISI Clearing house is 100% owned by ICDX and has obtained the license on 7th July 2009. The cooperation between ICDX and ISI allows for an fully integrated front end to back end system, beginning from keying in orders to settlement of trades. Through this system, the concept of an efficient Pre-Trade Margin could be implemented to ensure market integrity and assurance for both buyers and sellers.

As a clearing house, ISI has formed a partnership with PT. Aneka Tambang Tbk (Antam) UBPP Logam Mulia which was signed on early March. Through this partnership, Antam was appointed as the custodian and delivery point for gold contracts that are being traded on ICDX. The gold quality eligible for delivery is 99.99% which adheres to London Bullion and Markets Association.

As known, the growth of commodity futures trading needs the active participation of foreign market participants. Hence, CoFTRA as the market regulator has made some breakthroughs such as, issuing decree No. No.74/BAPPEBTI/per/12/2009 that governs the ownership of foreign owned futures brokerage up to 95% equity stake.

Moreover, CoFTRA has also issued another decree No.75/BAPPEBTI/per/12/2009 that allows Remote Trader membership class and therefore market participants that are not domiciled in Indonesia could trade to ICDX directly and become ISI member to clear their own trades. “Now it is clear, that overseas participants are able to get exposure with Indonesia commodity exchange,” added Megain.

Up to now, ICDX has 15 members, where 7 of the members are from the palm oil industry. ICDX members are PT. Wilmar Nabati Indonesia, PT. Sinar Mas Agro Resources Tbk, PT. Sampoerna Agro Tbk, PT. Duta Palma Nusantara, PT. BW Plantation Tbk, PT. Palm Mas Asri, PT. Ivomas Tunggal, PT. Monex Investindo Futures, PT. Millenium Penata Futures, PT. Danpac Futures, PT. Valbury Asia Futures, PT. Sinarmas Futures, PT. Universal Futures, PT. Aperdi, and PT. Monex Investindo.

Finally, with strategic steps, ICDX vision is to create a commodity and derivatives exchange in Indonesia that is open, credible, transparent, and easily accessed. Megain added “We are optimistic that we would be able to fulfill the vision with the support of market participants, and most importantly, the government”.

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