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Oversight Board votes to adopt three rule change proposals

24 August 2017

The GDT Events Oversight Board has voted to adopt three proposed rule changes designed to enhance transparency and enable more services to be developed. 

Bill Shields, the Chair of the Oversight Board, confirmed that 11 of the 12 members voted to adopt the changes and one member voted against two of the changes.  Mr Shields said “these changes received widespread support from buyers, sellers and financial market members of the Oversight Board, and drew similar levels of support from public consultation.  These are the first rule changes adopted since the Oversight Board was formed in 2016, and as such represent an important step forward for Global Dairy Trade’s transparency and expansion”.

Eric Hansen Director Global Dairy Trade said “the rule changes extend the cessation notification period, enable the establishment of multi-seller pools and will expand the conditions under which GDT winning prices are published”.

“They enable GDT to develop new services and further strengthen the systems and processes we use to provide credible reference prices for globally traded dairy ingredients,” said Dr Hansen.

The following two changes have been adopted within the GDT Trading Event Rules, which can be accessed here.

Cessation notifications

  • GDT will now provide six months’ notice of any intention to discontinue the trading platform; and sellers whose winning prices are used to settle financial instruments will provide six months’ notice of any intention to cease offering their products on GDT Events.
  • This proposal does not indicate any intention by GDT or any seller to discontinue the platform or cease offering products.
  • This change will help provide certainty to buyers and the financial markets on ongoing supply.

Multi-seller pools

  • A suite of rule changes has also been approved, allowing for sellers to offer supply of standard product specifications in one or more multi-seller pools on GDT Events. 
  • GDT will publish the identity of participating sellers, but no information about whether a seller is participating in a particular trading event, or the offer quantities of each seller.
  • The rule changes will extend the benefits of credible public price discovery to a wider range of markets and products by enabling greater confidentiality of individual seller’s commercially sensitive information while retaining the core transparency features of GDT Events. 
  • The first pool is expected to be launched for US-sourced generic lactose products later this calendar year.  GDT is working closely with a number of US dairy processing companies who have indicated willingness to offer supply into this pool.  

The third change relating to winning price publication will be adopted once the necessary technical changes have been implemented within the next three months.

Publication of winning prices

  • GDT will increase the number of prices it can publish, reducing instances of “n.p.”(not published) due to the winning prices being the same as starting prices.
  • The technical change will be completed within the next 3 months, at which point GDT will publish all prices that are deemed to be “market-determined”.
  • Prices will be considered “market-determined” when there is sufficient bidding demand at some point during the trading event to cause the price for the product to increase above its starting price. This will apply even if the subsequent demand response results in the price rolling back to the starting price. 
  • The winning price will then be published, and included in the calculation of average prices and price indices.
  • The only circumstance where a winning price will not be published is if bidding demand was such that a product’s price remained equal to the starting price throughout the entire trading event.

For more detailed explanation of each of these rule changes, please click here.

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