Posted on March 19, 2010

NZX announced earlir this week that it is in discussions with EnergyHedge over development of a platform to support the new hedge market. The announcement did not say that NZX has signed any contracts at this point, but one assumes that for an announcement to be made, they must be getting close. The fact that both EnergyHedge and ASX have been silent on the matter this week suggests to me that the announcement is the ’smoke’ coming from the ‘fire’.

Whoever is ultimately the hedge platform provider, time has moved along and hedge market participants really need to know who they’re going to be dealing with so that preparations can be made for a June 2010 start. We can only hope that NZX’s announcement is a sign that selection of a platform provider is likely very soon.

Despite that fact that NZX’s rules include rules for trading futres and options contracts, NZX would be starting from a low base in providing a futures trading platform (which is the requirement of the hedge market spelled out in the market reforms). This surely has to introduce a high degree of technology and implementation risk into the hedge market development process, which is on a tight time line. Selecting ASX would be a much lower risk alternative, so if it goes NZX’s way both EnergyHedge and NZX will need to demonstrate an exceptionally high level of skill to meet the government’s deadline.

We wait expectantly …

Greg Sise, Managing Director