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.
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 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.
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
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12 December 2023 - 6 February 2024
Consultation —Options to improve hedge disclosure obligationsView consultation -
19 October 2023
Code of conduct —For participants in the over-the-counter market
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11 July to 9 August 2023
Consultation —Improving hedge disclosure obligation requirementsView consultation -
13 December 2022
Correspondence —Outlines the findings of our information gathering exercise and our intended next steps
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31 October 2022
Correspondence —Requests participants to voluntarily provide off-market hedge information
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13 October 2022
Correspondence —Signals our intention to request information on off-market transactions for bilateral electricity hedge contracts
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.
Other projects in Enabling investment and innovation
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Making the electricity futures market more efficient.
Spot market settlement on real-time pricing
Dispatch-based, look-ahead design for real-time pricing to make wholesale spot prices more certain, accurate and efficient.
Code amendment omnibus
Consulting on amendments to the Electricity Industry Participation Code.