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A new "mini" version of the Global Dairy Trade (GDT) auction will benefit both buyers and sellers by providing price discovery on a more frequent basis, Fonterra's chief financial officer Marc Rivers says.
The pilot version of "GDT Pulse" which kicks off next Wednesday, was "another step forward" for the co-op's partnership with New Zealand's Exchange (NZX) and the European Energy Exchange (EEX), Rivers told The Country Sport Breakfast's Brian Kelly.
In February, Fonterra announced a strategic partnership with NZX and EEX to each take equal ownership stakes in GDT alongside the co-op.
The arrangement means each can work together to grow the GDT auction platform's presence across Asia and Europe, where EEX and NZX have comprehensive coverage.
Initially, GDT Pulse will offer auctions on alternate weeks between GDT Trading Events for a period of six to twelve months.
It would differ from the original GDT auction by offering only one product specification to bid on, Rivers said.
"Of course, that's significantly less than the regular GDT trading auction, which has 60-plus offerings across a multiple range of products and contract periods."
As a result, GDT Pulse would also be a lot quicker, he said.
"It's going to be a very short total duration auction of 15 to 30 minutes which will be a convenient option for bidders."
The new format would also increase flexibility by removing the need to wait two weeks for the next auction, Rivers said.
"The whole purpose is just to provide price discovery on a more frequent basis."
GDT Pulse would also give the market direction between events and provide more timely data to support planning, optimisation and inform tactics.
This would be of benefit to Fonterra, along with buyers and sellers, Rivers said.
"That extra pricing data ... will help deepen liquidity, which is going to enable us to help further manage forward pricing risk for our customers.
"Prices discovered through GDT Pulse auctions will be complementary to the price discovery that's provided on the bigger GDT events."