Stock exchange operator NZX is planning to launch a series of derivatives products starting this year, expected to boost profit and expand its business.Among those to be launched in the next two years are electricity derivatives, starting in May or June;
Stock exchange operator NZX is planning to launch a series of derivatives products starting this year, expected to boost profit and expand its business.
Among those to be launched in the next two years are electricity derivatives, starting in May or June; milk powder futures later this year; single stock equity options next year; dairy futures options in 2011; and other agricultural and gas and carbon derivatives in 2012.
Index futures and equity options contracts will be launched next year.
Derivative products derive their value from an asset. They price that asset through on-exchange trading, rather than through private contracts, improving price transparency, NZX said.
NZX is also establishing itself as a clearing house to act as counterparty to all trades, a service it currently does not offer.
Clearing house forecast revenue was expected to rise to $15m in over five years, with costs of up to $4m over the same period.
Dairy derivatives were forecast to provide annualised trading revenue of up to $2.9 million, and clearing and settlement revenue of up to $1.1m, NZX said in notes to investors.
Equity derivatives were forecast to provide annualised revenue of up to $3.2m from trading, and similar revenue for clearing and settlement, NZX said. Up to 15,000 options were expected to be traded daily.
A derivatives market would leverage New Zealand's competitive advantages and improve risk management, NZX said.
Derivatives investors are able to lock in forward prices or hedge exposure changes to the price of the underlying asset.
