Proposed changes to market making arrangements

The Electricity Authority Te Mana Hiko (Authority) is seeking to strengthen price discovery and confidence in the electricity forward markets by changing market making arrangements.

The Authority is consulting on proposals to change the Electricity Industry Participation Code 2010 (Code) that would require mandatory market making of the new standardised super-peak contract, extend longer dated futures to five years and reduce total baseload offer volumes.

“These complementary measures are intended to increase transparency of forward prices and improve confidence in the contracts market,” says Hayden Glass, Electricity Authority General Manager of Wholesale and Supply.

“Stronger price signals will better support risk management and enable entry and investment for a highly renewable electricity system which in turn will put downward pressure on prices for consumers.”

The electricity forward markets allow participants to fix their future price of electricity for a specified volume and time period. As spot price volatility increases with more intermittent generation such as wind and solar integrated into the electricity system, financial risk management contracts become increasingly important.

“Market making is an established and proven tool to improve the availability of contracts and price discovery,” said Glass.

“Market makers support liquidity in forward markets by providing continuous bids and offer prices. This also helps produce a robust forward price curve which provides valuable information about participants’ view of the future price of electricity and is important for operational decisions, investment planning and retail competition.”

The Authority consulted on proposals to strengthen trading of the super-peak product introduced in January which included continuing with voluntary trading with a conditional trigger for regulation. After considering submissions and further analysis the Authority has changed its position and believes requiring mandatory market making is necessary.

“We’ve placed more weight on market confidence, net benefits to the wider market, and alignment with the broader package of pro-competitive measures,’ said Glass.

“We think our approach will complement the proposed introduction of non-discrimination obligations from July next year by providing clear and objective future price information that can be useful in negotiations for risk management contracts in the over-the-counter (OTC) market.”

The proposals are:

• Introduce market making requirements for the standardised super-peak contract
• Extend longer dated futures from three to five years
• Reduce total baseload offer volumes from 12MW to 10MW

Submissions are due by 5pm on 23 December 2025 and subject to feedback, we aim to have the amended Code and market making of the super-peak product in place by mid-2026, and the new ASX contracts trading by early 2027.

We plan to facilitate an industry-led selection process to identify an OTC platform for trading standardised super-peak contracts.

The process aims to ensure the selected platform meets our expected standards for either mandatory or voluntary market making. We intend to commence this process late in 2025, with the provider expected to be selected by mid-2026. We will provide more details closer to the time.

Consultation