Consultation on ASX Australian Electricity Options strike interval settings

Mon 20 Jan 2025

As per Notice 0048.25.01, ASX is consulting on ASX Australian Electricity Options strike interval settings.

In 2023, ASX conducted a consultation on changing strike increments across Australian and New Zealand Electricity Options. The change involved increasing the minimum strike increment from $1 to $5 to facilitate more timely and efficient strike listings.

At the time, market feedback indicated that for Australian Electricity Option Contracts, it was important to be able to trade at a finer ($1) strike increment when underlying prices are lower and relatively stable. In addition, Participants felt it was important for ASX to be able to dynamically switch between different strike increments based on the underlying price for Australian Electricity Options. Based on this feedback and further historical analysis of Open Interest (available in the consultation response), ASX decided to keep the Australian Electricity Option strikes unchanged at a $1 strike interval.

Since then, ASX has undertaken development work to facilitate:

Dynamically auto-list option strikes at different intervals based on the underlying price. For example, when prices are below $100, option strikes are automatically listed in increments of $1, when prices rise to between $100 and $300, option strikes are automatically listed in increments of $5, and when they go above $300, option strikes are automatically listed in increments of $10.
List single strikes outside of the current strike range. For example, if strikes are listed up to $150, Participants can request ASX to list a strike at $200 without having to backfill all strikes between $150 and $200.
List single strikes within the current strike range. This can be utilised to request single strikes between the auto-listed intervals under the new settings. For example, if strikes are auto-listed at $5 for prices over $100, Participants would be able to request a strike between the interval such as a strike of $122 which would sit between the automatically listed values of $120 and $125.

Currently in Australian Electricity, across the Average Rate (Quarterly) Options (BN, BQ, BV, BS) and the Strip Options (HN, HQ, HV, HS), only 5% of the listed strikes have Open Interest. These changes will help facilitate a decrease in the number of option strikes with no Open Interest whilst simultaneously improving the efficiency of new strike listings and flexibility to list different strikes.

Request for feedback

ASX requests feedback from Market Participants regarding both auto-list option strike settings and system readiness.

For auto-list option strike settings, feedback is requested on the following:

What is the appropriate strike increment for different price levels? For example, where the underlying price is below $100, strikes should be listed at $1 increments. When the underlying price reaches $100, strikes should be listed at $5 increments.
What is the number (range) of strikes that should be automatically listed at each level as the at-the-money price moves? For example, auto listing 5 strikes at $5 increments would result in an upper and lower strike range of $50 ($25 either side of the at-the-money price).
Should the same strike increment settings be applied to both the Average Rate Options (BN, BQ, BV, BS) and the Strip Options (HN, HQ, HV, HS)? If no, please indicate your preferred strike increments for each of the Average Rate Options and Strip Options.

For system readiness, feedback is requested on the following:

Are your systems currently set up to be able to adequately and reliably support dynamic strike listings as described above?
Are there any other impacts on systems or processes that you would like to raise for consideration?

Please note that existing Electricity Option strikes that are already listed at the $1 increment would remain unchanged i.e. ASX would not look to delist any of the currently listed Electricity Options but would only apply these changes to any newly listed contracts or strikes. Existing Electricity Option positions and Open Interest would also remain unchanged.

What do I need to do by when?

Market Participants are encouraged to respond to ASX with feedback on the above by 28 February 2025 (email: commodities@asx.com.au). A follow up Market Notice will be sent in March 2025 to confirm the outcome of the consultation and next steps.

Need more information?

Issued by

Natasha van der Kolff, Product Manager, Commodities

Contact information

Customer Service
(02) 9338 0000