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Enabling investment and innovation

Over-the-counter market

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.

  • Wholesale

    • Overview

    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 June 2024 we decided to improve the Hedge Disclosure Obligations scheme. This will bring improved transparency of hedge information and provides clearer price signals for investment decisions in electricity generation and storage, supporting the electrification of New Zealand.

    The previous obligations provided limited transparency on new contract types and shapes, impeding participants’ ability to assess prices and negotiate contracts.

    In 2023, a voluntary Code of Conduct was created for participants in the OTC market by an industry working group. Signatories commit to a number of underlying principles and behaviours when participating in the OTC market.

    Timeline

    Past activity

    Project background

    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.

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