Risk management through the transition
The over-the-counter market is a key part of hedge market developments. Hedge markets is an umbrella term for all the markets that industry participants use to manage risks.
The over-the-counter (OTC) market is a type of off-market transaction in which multiple participants buy and sell financial contracts whose underlying asset is electricity.
In October 2022, we began gathering information to help us understand the OTC market to identify how to improve its operation. In December 2022, we published an open letter outlining our findings and intended next steps.
We are currently facilitating an industry-led working group to discuss how the efficiency of the OTC market could be improved.
13 December 2022Correspondence —
Outlines the findings of our information gathering exercise and our intended next steps
31 October 2022Correspondence —
Requests participants to voluntarily provide off-market hedge information
13 October 2022Correspondence —
Signals our intention to request information on off-market transactions for bilateral electricity hedge contracts
We started work on the over-the-counter (OTC) market in 2022 in response to restrictions placed on some New Zealand electricity market participants' ability to access the Australian Securities Exchange futures market.
First, we asked participants to voluntarily provide information on requests for proposals. We published a high-level analysis of this information and our findings in an open letter. We then interviewed individual stakeholders to better understand the barriers to efficient trade in the OTC market.
This project aims to improve the efficient operation of alternative markets. This will become increasingly important in managing the risks associated with New Zealand's transition to a low-emissions energy system.
Other projects in Risk management through the transitionView all projects
Financial transmission rights
Helping industry participants manage locational price risk to enable greater competition in the wholesale and retail markets.
Commercial market making
Making the electricity futures market more efficient.
Pricing in a renewables-based electricity system
How price discovery would work for the wholesale electricity market under a renewables-based electricity system.