More global investors could be attracted to the NZ market following the proposed third-time-lucky launch of the S&P/NZX20 Index Futures later this year, according to BNP Paribas Securities Services NZ head, Doug Cameron.
In release last week, Cameron said the mooted NZ equity derivative index – expected in the final quarter of 2022 – should increase “global connectivity to the local market and in-turn make it more accessible and efficient”.
First flagged in the 2021 NZX annual report, released in February, the S&P/NZX20 Index Futures has been a long-running project for the local bourse as it seeks to boost institutional interest in the market.
“We anticipate increased activity across trading, clearing and depository areas, and this also has the potential to attract new participants to our market,” the NZX report says.
However, unlike previous attempts to establish a viable futures index, the current effort appears to have widespread industry support.
“Our sector has seen mass collaboration of industry participants working on the proposed relaunch of the NZX20 index futures, which signals the continued development of New Zealand’s capital markets,” Cameron said. “Importantly, the relaunch would expand the range of NZX products at a time when institutional and sophisticated investors are looking for opportunities beyond traditional stocks.”
As well as offering a new avenue for global players to access the NZ market, the futures index would provide a useful liquidity management tool for local funds.
For instance, Hugh Stevens, head of NZX funds management, said the futures index would enable Smartshares to manage investor cashflows more efficiently.
“All effective equity markets have a futures index to provide real-time pricing information and liquidity out of trading hours,” Stevens said. “With the S&P/NZX20 index we will be able to put investor cash to work immediately, reducing the drag and tracking error from being out of the market.”
Smartshares is one of the foundation partners working on the new index, which will rely on a range of liquidity and pricing providers.
Meanwhile, BNP is poised to play a meaningful role in as a liquidity provider to the local market under plans to offer a clearing service to investors, as noted in the NZX report.
“We are looking forward to BNP Paribas joining as a
General Clearing Participant in FY2022 as they strengthen their commitment to helping grow New Zealand’s capital markets,” the NZX report says.
A BNP spokesperson said, once approved, the business would be able to simplify access to the NZ markets for offshore investors without relying on local brokers to clear funds.