AX market faces online challenger

By PAUL PANCKHURST

The former chief of the stock exchange, Bill Foster, is behind a new share trading system that may rob listings from his former employer's planned AX market.

Unveiled last night, Unlisted is a low-cost, internet-based trading platform for companies that do not want the costs and rules of a stock exchange listing.

It will serve as a replacement for the unlisted securities market - the unregulated, so-called "Dodge City branch" of the stockmarket - that is due to be scrapped after the launch of the AX.

The planned launch of Unlisted - based at www.unlisted.co.nz - is mid-October.

Foster said he was not antagonistic towards NZX, the exchange that he ran until retiring last year.

"We all want to see the capital markets do well in New Zealand."

But the new venture and its timing could be seen as unhelpful for the exchange's planned November launch of AX, the market for small companies and businesses with "alternative structures", such as co-operatives.

The stock exchange is targeting the 50-plus companies on the existing unlisted market as candidates for the AX.

Foster said he had not discussed the venture with the exchange.

Unlisted's publicity material says the technology platform for the new system will come from M-co, the company that runs the wholesale electricity market.

Listings will cost $5000 or $12,000 a year, with the higher fee applying to so-called "Governance Rule" issuers, those abiding by a set of minimum rules.

Like the AX, it is also intended as a home for "co-operatives and other entities" and trading will be carried out through stockbroking firms, the publicity material says.

Foster said the ownership of the venture was being finalised, but he would have a stake and M-co would hold 50 per cent.

"This is not," he said, "a venture which intends to make a whole heap of money in a short space of time."

Under New Zealand laws, the venture cannot hold itself out as a "stock exchange" or a "securities exchange".

Unlisted's publicity material says: "New Zealand's securities exchange regulatory structure is increasingly being designed for Australian and international harmonisation.

"This is good for international investors, but the 'one-size-fits-all' international registered exchange model is not always suited to small business."

Unlisted touts itself as suitable for businesses wary of listing prematurely on the stock exchange and for firms that do not need to raise capital, but want to provide liquidity for shareholders.

As flagged in the Business Herald last week, the Queenstown-based Skyline Enterprises is one of the firms likely to go with Foster's creation.

Asked if NZX could prevent sharebrokers from trading on Unlisted, Foster said he believed that would be a restrictive trade practice.

The Government sats New Zealand's securities laws are not intended to block small and innovative markets, or trading through "less formal" systems.