FUTURES Interest contract likely this month
PA Wellington The New Zealand Futures Exchange would probably introduce an interest-rate futures contract later this month, the exchange’s chief executive, xMr Len Ward, said yesterday. The contract was to have begun on February 11, but was delayed to enable the exchange’ to become more familiar with operating its United States dollar future contract, introduced on January 25.
■ Mr Ward said there was some debate about whether it would have been helpful to have had an interest-rate contract operating during last week’s volatile and hectic trading in short-term rates, which saw overnight deals done at 750 per cent. Some people said the presence of a contract would have allowed hedging and would have taken some heat out of the market. Others said that, given the volatility of the market, it was best not to have a relatively new contract in operation. It was generally agreed that last week would not have been a good time to start a contract. The NZFE board would meet later in the month to consider the contract, and Mr Ward said he expected a start this month. The contract will
cover prime commercial paper. Mr Ward said the NZFE was confident that it would also have a wool contract in operation by mid-year. The NZFE has been negotiating to take over the existing wool futures market. He could not discuss progress on these talks.
Mr Ward said he was delighted with the way the NZFE had handled the float of the New Zealand dollar last week. The U.S. dollar contract had reacted very quickly to changes in exchange rates and had been closely watched by all sectors of the foreign exchange market because it could offer instant pricing and because it was reacting quicker than the forwards market.
While the spot and forwards spreads were wide at one time, this reflected physical trading.
Mr Ward said volumes were high both before and after the float, showing a keen interest in trading futures. When the futures market volumes were smaller on Thursday and Friday, this reflected the reduced volatility in the U.S. and N.Z. do’llars, and was exactly how a futures market should operate.
All sectors had been active in the futures market and it was pleasing that the NZFE had been used by a wide range of banks, merchant banks and traders such as wool exporters. No one sector had dominated
and no sector had been reluctant to trade the US dollar futures. There had been straddling of the March and April contracts which indicated that the NZFE was being used by people expecting changes' in the cost of obtaining forward cover. Mr Ward said the NZFE had overcome the problem of line failures disrupting its computerised trading system. It had introduced a back-up inter-office system and this had kept the’market trading during a brief failure last week.
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Press, 12 March 1985, Page 26
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479FUTURES Interest contract likely this month Press, 12 March 1985, Page 26
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