Overseas brokers get direct access to NZ sharemarket next week

Overseas brokers will be able to trade directly in the New Zealand sharemarket from next week when New Zealand Exchange Ltd (NZX) launches direct market access.

Earlier this month sharemarket operator NZX said accredited firms will be able to trade in the New Zealand market via direct market access (DMA) from August 4.

NZX head of strategy Carl Daucher said DMA would give firms the ability "to tailor their services to suit existing clients and to reach a much broader range of new clients, both domestic and international".

NZX chief executive Mark Weldon told an analysts' briefing yesterday: "While overseas experience is not a perfect indicator of what will happen here, everywhere else in the world where direct market access has been successfully implemented it has facilitated an increase in liquidity that has tended cluster in the top 20 percent of stocks."

Mr Weldon said a lack of sharemarket liquidity was a concern for NZX.

DMA would enable the execution of a wider range of trading strategies including electronic strategies and programmed trades.

"Where the New Zealand market has suffered is the lack of electronic trading and hedge fund activity."

While those types of activity received "a bad rap" particularly from "ill informed regulators" they provided constant liquidity to markets Mr Weldon said.

"We would view that as an extraordinarily positive development for the market."

Mr Weldon said there were currently eight NZX firms currently "in various states of accreditation on direct market access".

NZX shares were up 5c to $8.60 this afternoon in a slightly positive market. The shares have traded as high as $9.75 and as low as $4.20 in the last 12 months.

- NZPA