Product Definitions

'American option'

An option style where you can exercise the transaction on any business day during the exercise period.

'average rate option or Asian option'

An option for which, on a specified date, the average underlying price over a specified period determines the amount payable on a settlement date.

'AUD'

Australian dollar.

AWEX'

Australian Wool Exchange.

'the 'Bank'

Commonwealth of Australia. ABN 48 123 123 124.

'business day'

A day on which the Bank is open for the transaction of business in relation to a particular agricultural or energy product.

'CAD'

Canadian dollars.

'calulation date'

The date on which the average of the commodity reference prices in the pricing period, and the average of the HSRA reference rates in the HSRA period are calculated which shall be the first business day following the last day of the pricing period.

'call'

An option where the buyer has the right but not the obligation to buy the underlying commodity at the call strike price.

'call strike price'

The agreed strike price of a Call at which the underlying commodity cash settlement amount will be determined on the settlement date.

'cash settlement amount'

A payment made by the Bank to you or by you to the Bank.

'CBOT'

Chicago Board of Trade.

'cleared funds'

Funds that are immediately available to you for settlement of your transaction.

'commodity price'

The price that a producer or consumer will receive or pay in exchange for the sale or purchase of their physical commodity.

'commodity reference price'

The price that will be used to determine the outcome of your transaction. The commodity reference price is determined by reference to a particular index or to the price of a particular futures contract on a particular futures exchange depending on the underlying currency of the transaction.

'confirmation letter'

A letter confirming the particulars of a transaction entered into between you and the Bank on a trade date.

'effective commodity price'

The commodity price that is the strike price adjusted for the premium.

'European option'

An option style where you can only exercise the transaction on the expiration date.

'exchange rate'

The expression of the value of one currency in terms of another. For example, in the exchange rate AUD/USD0.6500, 1 Australian dollar is equal to 65 United States cents (AUD1.0000 = USD0.6500).

'exercise'  or 'Exercised'

The process by which the underlying commodity is bought or sold at the strike price resulting in a cash settlement amount being exchanged on the settlement date.

'exercise date'

A business day on which the transaction is exercised.

'exercise period'

The agreed period/s from the trade date up to and including the expiration date. For the avoidance of doubt, an exercise period only applies in case of an American option.

'expiration date'

The last date for the exercise of a transaction as specified in the documentation.

'EYCI'

Eastern Young Cattle Indicator.

'first notice day'

The first day on which the clearing house notifies clearing members of delivery allocations.

'forward exchange rate'

The expression of the value of one currency in terms of another where the currencies are exchanged at a future date that is more than 2 business days after the business day on which the contract to exchange the currencies is entered into.

'front month futures contract'

The futures contract closest to expiry where the pricing date is less than the First Notice Day.

'futures contract'

A contract to purchase a specific asset or financial instrument at a specified time in the future at a specified price. Nearly all futures contracts are traded on a futures exchange and are standardised in terms of delivery date, amount and contract terms.

'futures exchange'

A market in which futures contracts are bought and sold, traditionally in a central, physical location, i.e. a trading floor. Increasingly though, futures exchanges are operated by dispersed traders using computer links to post prices to buy and sell the futures contracts.

'GBP'

Great British Pounds.

'hedge transaction'

A transaction aimed at eliminating or reducing the impact of adverse interest rate, currency or commodity price fluctuations.

'HSRA'

AUD/USD reference rate set at 9.45am each business day and published on Reuters page HSRA. The HSRA rates are compiled by the Reserve Bank of Australia by averaging the AUD/USD exchange rates of a sample of market participants in the foreign exchange market. When calculating the average, the highest and lowest rates are removed from the sample prior to computation.

'HSRA date'

For transactions where the fixed price or the strike price is denominated in AUD, 1 business day after the pricing date or the exercise date.

'HSRA period'

The period over which the HSRA reference rate is averaged.

'knock in trigger rate'

The agreed commodity reference price that will determine the final commodity reference price of the transaction at an exercise date.

'knock out trigger rate'

The agreed commodity reference price that will determine the final commodity reference price of the transaction at an exercise date.

'mark-to-market value'

A valuation method where an existing transaction is valued against current market rates to calculate any potential profit or loss on termination.

'master agreement and transactions addendum'

The Bank’s derivatives master agreement and commodity swap / option addendum.

'notice of exercise'

An irrevocable notice given by you to the Bank which may be given orally (including by telephone) or in writing of your intention to exercise the transaction.

'NYBOT'

New York Board of Trade.

'option style'

European, American and Asian options.

'parties to the agreement'

The parties to a transaction are you and the Bank.

'payment date'

For swaps, a business day on which a cash settlement amount will be exchanged between the parties to the agreement. For transactions where the fixed price is denominated in USD or CAD the payment date will be 2 business days after the pricing date. For transactions where the fixed price is denominated in AUD the payment date will be business days after the pricing date.

'physical settlement'

Settlement by delivering the transaction amount of the underlying commodity.

'premium'

The amount paid by the buyer of an option transaction to the seller in consideration of having the right but not the obligation to sell or buy a specified amount of a commodity at a strike price at an exercise date.

'pricing date'

The date the commodity reference price is determined.

'pricing period'

The period over which the commodity reference price is averaged.

'put'

An option where the buyer has the right but not the obligation to sell the underlying commodity at the put strike price.

'put strike price'

The agreed strike price of a put at which the underlying commodity cash settlement amount will be determined on the settlement date.

'reference price'

The benchmark exchange rate you agree with the Bank on the trade date to convert the commodity reference price to the same currency as the fixed price or the strike price on the pricing date or the exercise date. An example is the HSRA.

'settlement date'

For options, a business day on which a cash settlement amount will be exchanged between the parties to the agreement. For transactions where the strike price is denominated in USD or CAD the settlement date will be 2 business days after the exercise date. For transactions where the strike price is denominated in AUD the settlement date will be 3 business days after the exercise date.

'strike price'

The price at which the Call or Put may be exercised.

'termination date'

A date on which you or the Bank terminate the transaction.

'trade date'

The date on which a transaction is entered into by the parties to the agreement.

'transaction amount'

The agreed quantity of the underlying commodity of the transaction.

'transaction period'

The period from and including the trade date to and including the payment date or settlement date or the last payment date or settlement date where more than one payment date or settlement date is specified.

'transaction type'

A put or a call.

'trigger notice'

A notice sent by the Bank to you notifying that the trigger rate has been reached.

'trigger period'

The nominated period specified as such by the parties to the agreement, during which the trigger rate may be reached.

'USD'

United States dollars.

'volatility factor'

The expected degree of fluctuation in exchange rates, interest rates and commodity reference prices during the transaction period as calculated by the Bank.

'WCE'

Winnipeg Commodity Exchange.

'you' or 'your'

The customer who is one of the parties to the agreement.

  Like to know more?

• Email us to schedule a contact time to discuss your commodity requirements.
• Call us on 1800 150 478 from 8am to 5pm (Sydney time) Monday to Friday.