NZX’s suite of dairy derivatives will trade exclusively
on Singapore Exchange (SGX) from today – under a
partnership between New Zealand’s Exchange and
SGX.
This partnership combines NZX’s market
development expertise in dairy derivatives with SGX’s
global distribution capability. The joint stewardship of
these important contracts unites NZX’s core dairy
expertise in industry engagement, market research, and
product development know-how with SGX’s international
connectivity, under a working strategic
partnership.
The partnership will super-charge the
industry benchmarks with deeper platform connectivity and
broader client reach.
The listing of the SGX-NZX
Global dairy derivatives contract is a result of the
strategic partnership that was entered into between the two
exchanges in April 2021, which was designed to unlock and
accelerate the growth potential of the dairy derivatives
market that NZX has been developing over the past 11
years.
NZX Chief Executive, Mark Peterson, said the
partnership brings together the complementary capabilities
of the NZX and SGX to scale up market distribution and
liquidity in the global dairy derivatives
markets.
“We see this as accelerating
market distribution which brings together significantly more
buyers and sellers globally, increasing trading activity and
benefiting all dairy participants, including the New Zealand
dairy farmers and processors who find these contracts
particularly important in managing
risk.”
Mr Peterson said this enhanced
liquidity will be driven by unprecedented access to the
dairy derivatives markets via augmented trading and clearing
channels. The number of trading and clearing firms has been
expanded from 4 to more than 70, independent software
vendors (ISVs) from 2 to more than 25, and this would be
complemented by SGX’s 10 international offices offering
significantly greater regional sales support.
“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.” He said new tools to deal with price volatility
and its associated risks are crucial and in huge demand by
dairy processors and end-users.
Loh Boon Chye, Chief
Executive Officer of SGX, said, “The past few months have
been extremely fruitful for both SGX and NZX, as we worked
together to execute this first-of-its-kind partnership
between two exchanges to internationalise and grow the
liquidity of a well-established product that will benefit
the global dairy industry.”
“Through SGX’s
global distribution network and successful derivatives
franchise, we look forward to a close and fruitful
collaboration to bring NZX’s suite of dairy derivatives to
its next phase of growth.”
NZX launched its dairy
derivatives market in 2010, enabling market participants
across the dairy production chain – from farmers through
to international manufacturers of dairy products – to have
access to a tool to efficiently manage price risks inherent
within global dairy markets.
Over the past 10 years,
NZX has grown the contract suite to include eight futures
and options contracts across dairy ingredients including
Whole Milk Powder (WMP), Skim Milk Powder (SMP), Butter
(BTR) and Anhydrous Milk Fat (AMF) as well as liquid NZ Milk
Price (MKP)
contracts.
