About NZFOX

NZFOX products are New Zealand futures and options contracts, which are listed and traded on the Sydney Futures Exchange (SFE). NZFOX products are based on New Zealand equity securities listed on NZX's markets. NZFOX products are created and marketed in New Zealand by NZX.

About NZFOX futures and options

The futures and options market is different to the equities market in New Zealand, where companies choose to list on a market operated by NZX eg. the NZSX Market or NZAX Market. In the futures and options market, products are based on underlying securities listed on an exchange. NZFOX products are based on underlying securities listed on any one of NZX's markets and are listed on the SFE. NZX is responsible for NZFOX product marketing and promotion and the SFE is responsible for trading, settlement and clearing.

For some time, New Zealand investors have been disadvantaged by the lack of liquid share index futures and share options contracts in New Zealand. They are a prerequisite for any sophisticated financial market because they allow investors to hedge their positions and, for relatively little cost, gain exposure to potential profit through future price movements, whether upward or downward. NZX believes, based on international research, that a liquid futures and options market will boost liquidity in the underlying markets. Futures and options are also very popular around the world.

New Zealand investors will be able to buy and sell NZFOX products through accredited NZX Futures and Options Participants or any other entity authorised to do so by the Securities Commission (including SFE Full Participants).

• To find out more about futures and options visit the Education section.

Sydney Futures Exchange agreement

NZX has contracted with the Sydney Futures Exchange (SFE) which provides a centralised electronic trading facility (SYCOM®) where individuals or institutions can buy or sell futures and options contracts for delivery (share options) or cash settlement (share index futures) at specified future dates.

The SFE provides a day to day measurement, represented by bids, offers and the prices of trades, of all known factors affecting supply and demand. This provides transparency of prices for the physical (underlying) market – increasing its efficiency and competitiveness. This price discovery function represents one of the most important economic functions of a futures market.

Futures and options prices are determined by competitive bidding and offering, which – as a general rule – must be presented to the whole market to ensure that prices are truly competitive.