Indonesian regulator approves two commodity contracts, more to follow

JAKARTA Wed Dec 18, 2013 1:30am EST

JAKARTA Dec 18 (Reuters) - The Jakarta Futures Exchange (JFX) has received government backing to launch coffee and rubber futures contracts, a regulatory official said on Wednesday, as Indonesia moves to secure itself a bigger role in pricing commodities.

Indonesia is the world's biggest exporter of refined tin, nickel ore and thermal coal, the biggest grower of palm and the second-largest producer of rubber and robusta.

In recent years Southeast Asia's largest economy has launched several commodity contracts, with limited success due to a failure to attract liquidity. But an Aug. 30 rule forcing tin producers to trade on a domestic exchange before shipping could change this.

"COFTRA will boost commodity futures trading at local exchanges in an effort to create price references locally and to provide services for commodity business people in hedging their commodities," Sutriono Edi, head of Indonesia's Commodity Futures Trading Regulatory Agency (COFTRA) told Reuters.

"For this we have approved two new commodity contracts -- coffee and rubber -- to be traded on the Jakarta Futures Exchange," he added.

"Hopefully we will also approve a coal contract early next year for the JFX."

To ensure domestic supplies and boost downstream industries, Indonesia sets a monthly export tax for cocoa beans and crude palm oil, calculated on the basis of both domestic and international prices.

Edi reiterated the agency's commitment to approve only one exchange for each commodity, citing the Indonesia Commodity & Derivatives Exchange's (ICDX) physical tin contract.

"It will be difficult to take a price reference if there are two exchanges or more that trade the same contract," he added. "ICDX will keep trading tin because it has been successful ... both in volume and price, which keep increasing."

The ICDX plans to build on its physical tin contract by next year offering tin futures it hopes could help win trade from the London Metal Exchange. (Reporting by Yayat Supriatna; Writing by Michael Taylor; Editing by Clarence Fernandez)