Thursday, August 18, 2022

NZX dairy futures move offshore

Trading of NZX dairy derivatives has transferred to the Singapore Exchange (SGX) exclusively to scale up market distribution and liquidity.

Jarden head of derivatives Mike McIntyre says farmers should benefit from more players in the market and increased liquidity.

Trading of NZX dairy derivatives has transferred to the Singapore Exchange (SGX) exclusively to scale up market distribution and liquidity.

The number of trading and clearing firms has been expanded from four to more than 70 and the numbers of buyers and sellers of contracts will grow considerably.

NZX chief executive Mark Petersen says the partnership agreement and expansion would benefit all participants, including New Zealand dairy farmers and processors.

“With the physical dairy market continuing to evolve, working in partnership with SGX opens up the potential to grow these derivative products to many multiples of the physical dairy market,” Petersen said.

He says new tools to deal with price volatility and its associated risks are crucial and in huge demand by dairy processors and end-users.

NZX launched dairy derivatives on its market in 2010 and the number of futures and options contracts has grown to eight, covering whole milk powder, skim milk powder, butter, anhydrous milk fat and liquid milk prices.

Jarden head of derivatives Mike McIntyre says farmers should benefit from more players in the market and increased liquidity.

“It will be easier to execute orders and bring greater price discovery, informing the market where prices are for the eight products,” McIntyre said.

He saw scope for more dairy products in the derivative market, perhaps offering contracts on milk prices in seasons further out in the future.

For local brokers like Jarden, the change to SGX comes with a later market opening time each day and has already resulted in a lot more enquiries, he said.

NZX head of derivatives Nick Morris says the partnership with SGX was focused on growing liquidity, via a larger network and platform, to result in better pricing and execution for farmers and other traders.

“SGX also has a high profile in Asia where the majority of international physical dairy buyers reside, presenting opportunities to grow interest in the markets via their local language speaking sales offices throughout the region including in China,” Morris said.

The collaboration is a working partnership and NZX is committed to leading the sales and product development of the contracts, as well as other aspects such as the GDT relationship, and its Data & Insights services.

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