NZX to extend trading hours for dairy derivatives

Subject to regulatory approval, the market will stay open until 10pm NZ time.

NZX says it plans to extend the trading hours for dairy derivatives market in July 2018 to reach more traders in Asia and Europe.

Subject to regulatory approval, the market will stay open until 10pm NZ time, from a current market close of 4pm, extending the trading day to 20 hours from 14. Opening times remain unchanged. The changes are in response to customer demand, it said.

"We expect to see an increase in participation and volume traded on NZX's dairy derivatives market as a result of the new closing time," said Nick Morris, NZX head of derivatives. "This extension will also enable key dairy buying regions, such as the Middle East and Africa, greater access to NZX's dairy derivatives market and support New Zealand's position as a global leader in this industry."

NZX offers futures and options contracts in whole (WMP) and skim milk powder (SMP), futures in anhydrous milk fat and butter, and futures and options in the farmgate milk price. It added the skim milk powder option contract this month having noted a 113 percent surge in interest in SMP this year.

New Zealand is the world's biggest dairy exporter, selling about $13.1 billion of milk powder, butter and cheese overseas in the year through September. NZX launched the dairy derivatives market in October 2010 with the aim of becoming the global hub for trading tied to the country's biggest export commodity.

The latest GlobalDairyTrade auction tonight will be the first since Fonterra Cooperative Group cut its milk payout forecast on Dec. 7 to $6.40 per kilogram of milk solids citing weaker global dairy prices and increased production and skim milk stockpiles in Europe. Analysts at the NZX's AgriHQ said today that results at the auction tonight are likely to be mixed, with a gain in WMP and a drop in SMP.

"WMP has found support in recent weeks from the dry conditions NZ is currently experiencing," they said in a report. "The extremely hot and dry summer thus far will reduce milk supplies this season and therefore WMP supplies are expected to tighten."

There were 25,997 futures lots traded in October, up about 50 percent from a year earlier, according to NZX's monthly metrics. Options lots traded fell 12 percent to 1,900. Open interest jumped 39 percent to 51,391.


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