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NZX plays down complaint over dairy futures

Wednesday 15th September 2010

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NZX, which is launching dairy futures trading next month, has played down the significance of a complaint that Fonterra will be able to influence derivative prices.

The bourse operator will use Fonterra’s globalDairyTrade milk powder price  as the reference price for its futures contracts. That was the best option for a reference price on its dairy futures market because of the exporter’s transparency and international integrity.  

“Despite the fact that settling a price to an Agrifax index would materially grow the value of the NZX – NZX decided that it would settle to gDT as it better represented actual prices paid for whole milk powder, and was the best reference price for the entire dairy industry, not just Fonterra,” NZX said.

“The benchmark for dairy pricing is going to be a matter of regular public record, and having the scrutiny of a global external market, and its regulators, will afford increasing transparency over the reference price – gDT – and its formation,” it said.

The integrity of the system was questioned when Open Country Dairy, the target of the Talley’s family’s Affco takeover bid, laid a complaint with the Securities Commission over the use of Fonterra’s online trading platform as a reference price.

The stock exchange will launch whole milk futures on October 8 and will introduce new futures and options products in the coming months. The futures contract will be traded on the NZX platform and settled by cash, and will be cleared through the new clearing house operated by New Zealand Clearing.

The Securities Commission last week authorised NZX to operate a derivatives market and launch new products.

NZX shares climbed 4.5% to $1.62 in trading today.

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