THEORY AND APPLICATION OF CRUDE PALM OIL FUTURES (FCPO): FROM THE PERSPECTIVE OF SHARIAH
DOI:
https://doi.org/10.33102/2a6e0702Keywords:
Theory, Application, Crude Palm Oil Futures (FCPO), Shariah-Compliant Crude Palm Oil Futures, Islamic FinanceAbstract
Commodity futures markets play a critical role in modern financial systems by facilitating risk management, enhancing price discovery and improving market efficiency. This study examines the theory and application of the Crude Palm Oil Futures (FCPO) market in Malaysia, with the aim of bridging the gap between theoretical constructs and real-world market practices. While existing literature predominantly focuses on isolated aspects such as price discovery, hedging effectiveness and volatility, limited attention has been given to the integrated analysis of how the FCPO market operates in practice as a Shariah-compliant instrument. To address this gap, the study adopts a qualitative research design based on doctrinal and content analysis, drawing on academic literature, institutional documents and industry reports. The findings reveal that the FCPO market operates within a highly structured institutional framework governed by Bursa Malaysia and Bursa Malaysia Derivatives, incorporating key mechanisms such as standardized contracts, centralized clearing, margining systems and daily mark-to-market settlement as a Shariah-compliant instrument. These mechanisms play a critical role in ensuring market integrity, reducing counterparty risk, facilitating continuous trading and avoiding all the prohibited elements in Shariah. Overall, the study concludes that the FCPO market operates as a multi-functional system in which hedging, price discovery and speculative activities interact in a complex and evolving manner. By providing an integrated operational analysis, this study contributes to a deeper understanding of Shariah-compliant commodity futures markets and offers a foundation for future empirical research.
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