A number of initiatives are being introduced for the New Zealand 90 Day Bank Bill Futures and Options contracts, listed on the New Zealand Futures and Options Exchange (NZFOE). This follows extensive customer consultation with the objective of ensuring the continued success of the New Zealand Bank Bill product.
Doubling of Contract Size
The contract size of New Zealand 90 Day Bank Bill Futures and Options contracts will be doubled in notional value size from NZ$500,000 to NZ$1,000,000. The conversion will take place on the last weekend in July (Friday 26th - Sunday 28th July 2002).
This change will bring the contract into line with similar products traded on international markets and will substantially improve the risk/reward profile for both investors and traders. The attraction of more offshore interest in the Bank Bill contract is also expected due to the increased tick size.
Revised Fee Structure
From Monday 29th July 2002, the trading fee for the New Zealand 90 Day Bank Bill Futures and Options contracts will increase from NZ$2.50 (including GST) to NZ$3.30 per side (including GST). A similar fee change will also apply to other NZFOE products.
Taking into account the doubling of the Bank Bill contract size, the new fee structure will lead to a relatively lower fee for trading this contract. That is, the new fee structure represents a reduction in the trading fee from NZ$2.50 (including GST) to NZ$1.65 (including GST) per NZ$500,000.
Introduction of a Fees Incentive Scheme To coincide with the conversion of the New Zealand 90 Day Bank Bill contract and the revised fee structure, a new Fees Incentive Scheme for all NZFOE products is being introduced. This scheme is designed to incentivise large volume users of NZFOE products and will commence on Monday 29th July 2002.
Going Forward
New spread trading opportunities between the Australian Bank Bill Futures contract and the New Zealand Bank Bill Futures contract will soon be available via SYCOM". This will be made possible by the doubling of the New Zealand Bank Bill contract size and the planned integration of NZFOE with SFE in early 2003.
NZFOE is also in discussions with potential market makers for the NZ Bank Bill and NZ Bond contracts. Introducing market makers would underpin the further development of the market by improving liquidity, following the doubling of the Bank Bill contract.
Although doubling the contract size of the New Zealand Bank Bill may reduce the number of contracts traded in the near term, the new trading opportunities created (eg spread trading), along with relatively lower fees and market makers should more than offset this over time.
