"When we consulted the key market participant groups about the makeup of the new NZFOX products, we realised that neither the NZSX 50 nor the NZSX 10 were going to provide a suitable basis for the index future," said Guy Fisher, NZX Index Manager. "We needed an index that would allow the possibility of arbitrage between the cash and futures markets, while still providing a broader exposure and focus than a basket of ten stocks," said Fisher.
"We believe the NZSX 15 provides the optimum range of stocks that is easily tradable and appropriately representative of the whole market. This is critical for the development of a liquid index future," said Fisher.
The new index will be comprised of the largest and most liquid 15 domestic securities listed on the NZSX Market. Over the last year, these 15 securities accounted for more than 70% of the total value traded on the NZSX. Constituents will be weighted by free float market capitalisation, with the weighting of any single security capped at 30%. It will be reviewed every six months.
"The new index futures contract over the NZSX15 index will be relevant for both domestic and international investors," said Humphrey Sherratt, Goldman Sachs JB Were. "The NZSX15 provides an appropriate representation of the NZ market and the underlying liquidity of these securities should result in an actively traded futures contract."
NZX also wishes to announce that it has identified the initial five options contracts planned for launch in May this year. The contracts will be based on the following NZX listed securities:
- Carter Holt Harvey Limited (CAH)
- Contact Energy Limited (CEN)
- Fletcher Building Limited (FBU)
- Telecom New Zealand Limited (TEL)
- The Warehouse Group Limited (WHS)
NZX is currently running courses to accredit Futures & Options Participants to enable trading and advising in NZFOX products, and expects to have 150 accredited Futures & Options Participants by the time the new NZFOX products start trading. Participation in NZFOX training courses is still available and a full list of dates and locations can be found at www.nzx.com/market_prof/nzfox_dealers.
NZX will also have a full draft of the proposed new Futures and Options Rules relating to the licensing of Futures & Options Participants in New Zealand available for public review on Friday 20 February. These Futures and Options Rules will be approved by the Securities Commission, which is responsible for the overall regulation of futures dealers in New Zealand.
The full list of NZSX15 Constituents can be found at www.nzx.com/nzxmarket/nzsx/indices/nzsx15.
