KEY POINTS:
The Securities Commission is concerned that sharemarket operator New Zealand Exchange's diversification into new commercial operations may compromise its position as front line regulator of its own markets.
In its annual review of the company's regulatory functions, the commission noted that NZX had expanded its commercial activities to
include various information and data services and was seeking regulatory approval in Australia for an electronic communication network (ECN), a form of low cost trading platform for equities.
"While we do not review NZX's commercial activities, we are concerned with the risk of potential conflicts that might arise between its regulatory and commercial functions as NZX expands its commercial activities," the commission said.
"While we are not aware of any such conflicts at this time, we will continue to review this issue in our future oversight review of NZX."
Overall, the commission gave NZX a big tick. "The commission's overall conclusion is that NZX is satisfying its obligation to operate its markets in accordance with its conduct rules."
Commenting on the availability of market information on NZX's website, the commission noted there was a view that "to establish a fair and transparent securities market, all investors, whether retail, professional or institutional, should have equal access to market information in order to make informed decisions".
"One way to achieve this result would be to eliminate the disparity in the availability of market information by providing real-time company announcements on the website."
At present NZX only provides free real-time access to the company announcement headlines, with the entire announcement made available 20 minutes later.
The commission considered the argument that retail investors sought advice through professional brokers. "Therefore the public website ... would not have to provide the same market information as fee-based subscriber services, widely used by professional and institutional investors."
Also noting the range of timely market information available around the world, the commission said it "did not consider it inappropriate for NZX to charge fees for more timely access to information".
Elsewhere, the commission mildly rebuked NZX's Special Division, the independent body set up to deal with regulatory issues involving NZX itself, which is listed on its own market.
The commission said the Special Division had gone beyond the scope of its role by reviewing the merits of a proposed share incentive scheme for chief executive Mark Weldon rather than simply ensuring the scheme was explained clearly to shareholders.