|01/04/2017||Implied spot price from bid-ask spread (bid)||55.942451|
|01/04/2017||Implied spot price from bid-ask spread (ask)||57.155784|
|01/04/2017||Average spot price to-date||33.879375|
|01/04/2017||Average spot price to-come||73.132348|
|01/04/2017||Daily average spot price||33.879375|
|02/04/2017||Average spot price to-date||32.220187|
|02/04/2017||Average spot price to-come||73.568492|
|02/04/2017||Daily average spot price||30.561000|
|03/04/2017||Implied spot price from trade||54.470696|
|03/04/2017||Implied spot price from bid-ask spread (bid)||54.418991|
|03/04/2017||Implied spot price from bid-ask spread (ask)||55.246264|
|03/04/2017||Average spot price to-date||40.192902|
|03/04/2017||Average spot price to-come||74.051722|
|03/04/2017||Daily average spot price||56.138333|
|04/04/2017||Implied spot price from trade||57.117438|
|04/04/2017||Implied spot price from bid-ask spread (bid)||57.117438|
|04/04/2017||Implied spot price from bid-ask spread (ask)||57.588127|
|04/04/2017||Average spot price to-date||44.208218|
|04/04/2017||Average spot price to-come||74.255283|
|04/04/2017||Daily average spot price||56.254166|
|05/04/2017||Implied spot price from trade||59.796996|
|05/04/2017||Implied spot price from bid-ask spread (bid)||59.003391|
|05/04/2017||Implied spot price from bid-ask spread (ask)||60.855136|
|05/04/2017||Average spot price to-date||45.291658|
|05/04/2017||Average spot price to-come||74.462193|
|05/04/2017||Daily average spot price||49.625416|
|06/04/2017||Implied spot price from bid-ask spread (bid)||57.523071|
|06/04/2017||Implied spot price from bid-ask spread (ask)||59.075424|
|06/04/2017||Average spot price to-date||45.798152|
|06/04/2017||Average spot price to-come||74.750992|
|06/04/2017||Daily average spot price||48.330625|
|07/04/2017||Implied spot price from trade||57.175578|
|07/04/2017||Implied spot price from bid-ask spread (bid)||56.308911|
|07/04/2017||Implied spot price from bid-ask spread (ask)||57.933911|
|07/04/2017||Average spot price to-date||45.793059|
|07/04/2017||Average spot price to-come||75.061820|
|07/04/2017||Daily average spot price||45.762500|
|08/04/2017||Average spot price to-date||43.603640|
|08/04/2017||Average spot price to-come||75.410622|
|08/04/2017||Daily average spot price||28.277708|
|09/04/2017||Average spot price to-date||41.912564|
|09/04/2017||Average spot price to-come||75.978488|
|09/04/2017||Daily average spot price||28.383958|
|10/04/2017||Implied spot price from bid-ask spread (bid)||55.323531|
|10/04/2017||Implied spot price from bid-ask spread (ask)||57.177235|
|10/04/2017||Average spot price to-date||41.914391|
|10/04/2017||Average spot price to-come||76.558909|
|10/04/2017||Daily average spot price||41.930833|
|11/04/2017||Implied spot price from bid-ask spread (bid)||54.753745|
|11/04/2017||Implied spot price from bid-ask spread (ask)||56.232495|
This report derives the implied spot price for the remainder of a futures contract period from the bid-ask spread and trade within the contract period. A contract trade above the average spot price to-date indicates a market expectation that spot prices for the remainder of the contract will be higher (or vice versa).
The traded price of a futures contract provides insight into the market's expectation of the spot price for the contract period. Futures contracts are able to be traded up until the day the contract expires. Settlement occurs several days after the expiration date. During the contract period, the price at which the contract trades will take into account the information already known about the spot price to date and the market’s expectation of the spot price for the remainder of the contract period. This report derives the implied spot price for the remainder of the contract period from the bid-ask spread and trade within the contract period.
The average spot price to-date (blue line) is the simple average of the half-hourly spot price from the beginning of the contract period at the selected location. A trade (or a willingness to trade) above the average spot price to-date suggests the market expects, or is implying, that the spot price for the remainder of the contract period will be higher than the average so far. The degree to which this trade price is above the average spot price to-date lets us derive the implied spot price for the remainder of the contract. Clearly the opposite also applies, with a trade price below the average spot price to-date implying a lower spot price is expected for the remainder of the contract. Contracts are settled as a Contract for Differences (CfD) after contract expiry. Holders of a contract at expiry that was purchased at a price above the average spot price (the last blue data point) will owe money to the exchange. Conversely, holders of a contract purchased at a price lower than the average spot price will receive funds from the exchange.
Trade in New Zealand electricity futures tends to be relatively light during the contract period. We have included the settlement price (orange line) only on days when a trade occurs, and have derived the implied spot price (red line) from this trade price. In addition we have derived the implied spot price range (shaded blue region) that is indicated by the bid-ask spread for the contract, as this ‘willingness to trade’ still provides insight into the market's expectation of spot prices for the remainder of the contract. The settlement price (orange line) and the average spot price to-date (blue line) generally converge as the contract period progresses and uncertainty diminishes regarding both the average spot prices for the contract period (there remains less time that the spot price is unknown) and the future spot price (there exists greater certainty about near-term spot prices).
We include a series for the ‘average spot price to-come’ once the contract is complete (we can’t see the future either!). This series allows a comparison between the market 's expectation of spot price for the remainder of the period and what the realisation of this expectation turned out to be. Generally the implied spot price from trade (red line) and the average spot price to-come (green line) will tend to converge as the contract period progresses when the market 's prediction is correct. If the implied spot price from trade (red line) on any day is lower than the average spot price to-come (green line), then the purchaser (and holder) of the futures contract will receive money when the contact is cleared by the exchange.
The Authority acquires ASX data on a subscription basis and receives it following the close of trade each day. See http://www.asx.com.au/products/energy-derivatives/new-zealand-electricity.htm for a complete description of contract specification terms, including reference locations, units, commodity types, and contract durations. A settlement price is determined for each contract at the end of every trading day, regardless of whether any trades for the particular contract occur. The process for determining the daily settlement price can be seen at http://www.asx.com.au/documents/products/energy-market-policy.pdf. The settlement price data is not made available.
Maturity or expiry dates apply for all individual contracts for each instrument, commodity type and duration. Users can select a specific contract expiry date that, when combined with a location, commodity type, and duration, define a specific contract.
Duration refers to the contract duration and are either monthly, quarterly, or calendar-year strips. Monthly contracts are introduced at the beginning of each quarter for the three months of the subsequent quarter. Quarterly contracts for all quarters in a year are introduced on the first trading day of the fourth quarter for the quarters of the year four years hence. Monthly and quarterly contracts may be traded from the time they are introduced until their date of expiration. Strips contain a strip of four quarterly contracts covering one calendar year. They are introduced at the beginning of the fourth quarter for the year four years hence, and may be traded up until the end of the first quarter in their year of expiration.
Commodity types are baseload and peak. Baseload commodities refer to 0.1 MW of electrical energy per hour for every hour of the contract's duration. Peak commodities only exist for quarterly durations and refer to 0.1 MW of electrical energy per hour for all hours between 7:00am and 10:00pm on each business day within the contract's duration. The implied spot price is not derived for peak contracts at this time.
Location refers to the two locations at which New Zealand electricity futures contracts are traded, Otahuhu (Auckland) in the North Island and Benmore in the South Island.
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