You deal with us as counterparty to every transaction you enter into on our platform. You will have an exposure to us in relation to each transaction if we are not ready, willing or able to meet our obligations, for example, if we were to become insolvent. You are reliant on our ability to meet our counterparty obligations to you to settle the relevant contract(s).
We limit this exposure by hedging our exposure to our clients by entering into equal and opposite transactions as principal with our parent company, Hantec Markets (Australia) Pty Limited (“HMA”). HMA is a holder of Australian Financial Services Licence (AFSL no 326907), which was issued by the Australian Security and Investment Commission in 2008.
In turn, HMA may enter into hedging transactions in the wholesale market in relation to its exposures. HMA, but not HMNZ, is then exposed to counterparty risk with that hedging party.
Our group policy is to manage our group exposure to market risk from client positions by offsetting (hedging) some, but not all, client trades with external liquidity providers, on a back-to-back basis. Thus, there is limited risk to us. Providers are chosen based on their ability to provide liquidity in the underlying market as well as the strength of their balance sheet.
Determining whether Hedging Counterparties are of sufficient financial standing:
If at any time we engage additional hedging counterparties, we will ensure that hedging counterparties are appropriately licensed and regulated by an independent body in the relevant jurisdiction and meet the following criteria:
1. have strong financial and compliance (including risk management) resources;
2. have sufficient resources to service our needs and the volume of trades we anticipate placing with them; and
3. have a proven track record in relation to Over-The-Counter (“OTC”) products.