NZX, watchdog sign agreement

NZX chief executive Tim Bennett says the agreement will help the sharemarket operator deepen capital markets.

NZX chief executive Tim Bennett says a freshly inked agreement with the Financial Markets Authority will help the sharemarket operator deepen New Zealand's capital markets through the development of new products for investors.

The FMA and NZX yesterday announced the signing of a memorandum of understanding (MOU) that formalises their shared regulatory responsibilities.

Under the current regime, NZX acts as the frontline regulator, carrying out operations such as market surveillance and disciplinary action, while the FMA is the overall regulatory body for the country's financial markets.

The non-binding MOU focuses on four areas - relationship governance, oversight review process, operational interaction and public statements.

Two joint NZX/FMA committees have also been created, one of which will focus on oversight matters and the other on operational functions.

Bennett said there was a "terrific opportunity" to deepen New Zealand's capital markets through innovation and new investment offerings.

"A key part of that is how they're regulated," he said.

Bennett said the soon-to-launch NXT market was an example of how the NZX and FMA, working together, could create new offerings.

In September the FMA approved the less onerous disclosure regime under which NXT will operate.

Targeted at firms in the $10 million to $100 million market capitalisation range, NXT is expected to provide a less costly platform for small, fast growing firms to raise capital.

"The NXT market is a good example of where the legislation was crafted to allow created solutions to the issue of smaller companies gaining access to capital," said FMA chief executive Rob Everett.

"What the NZX came up with for that market pushed us quite hard."

He said a "robust debate" took place during the establishment of the new market and the FMA "imposed its will" in some areas such as the role of NXT advisers and how many independent directors NXT issuers should have.

Discussing potential future innovations in the market, Bennett said algorithmic trading - the use of electronic platforms that execute pre-programmed trading instructions - could be introduced. "There's lots of things we can do to improve the way the markets operate and develop the markets more."

The two organisations said the MOU would also work to ensure markets remain fair, transparent and orderly through focusing on areas such as continuous disclosure, the review of offer documents and surveillance and investigation of market manipulation and insider trading.

Everett said it was important that NZX and the FMA avoided any duplication in respective regulatory operations.

"We do not want to be monitoring the same activity."