Jim Eagles: 'Sorry but we're closed' should be no excuse

Are New Zealand investors in danger of falling through gaps created by globalisation of the equities market?

That question is raised by the sharply different approaches the New Zealand and Australian Stock Exchanges adopted in dealing with two important pieces of news.

At 6pm New Zealand time on November 4 - in other words, when the ASX closed - Telecom issued a statement indicating that its first-quarter results were likely to be at the low end of analysts' forecasts.

Exactly four minutes and 45 seconds later, it was posted on the ASX website and distributed through its announcements platform.

ASX spokesman Gervase Greene said the policy was "to be as quick off the mark as we can and, particularly if it is market-sensitive information, it gets priority".

The NZSE announcements platform closes at 5pm, so the statement was not distributed in New Zealand until 7.57am, which, as it happens, is before the platform officially reopens.

NZSE markets and relationships manager Geoff Brown explained that "Telecom was first off the blocks because of its significance".

The importance of the information became apparent immediately the exchange opened one hour later because Telecom shares plunged 9.6 per cent, wiping $940 million off the company's value.

Certainly, investors on both sides of the Tasman were informed while their local markets were closed. But, equally clearly, any New Zealand investors relying on the NZSE for information could have been disadvantaged by getting access to significant news about Telecom 14 hours after their Australian counterparts.

To be fair, the situation was reversed on November 12 when Telecom announced its first-quarter result. The NZSE distributed the information at 8am and the ASX followed at 10.24am (8.24am in Sydney). But that information did not have anything like the same impact on the market.

Of course that sort of time difference has been a fact of life for years and, as the NZSE's Brown points out, New Zealand has usually benefited by being the first market in the world to open each day.

But given the increasing number of New Zealand companies listed in Australia - and vice versa - with continuous disclosure about to be the rule on both sides of the Tasman and in an age of internet broking, it is an issue likely to be of increasing significance.

It arises in part because of the time difference, but it is also due to the NZSE's announcements platform being open for a much shorter time than the ASX equivalent.

NZSE listing rules state specifically that: "All announcements for public release to the market by the exchange shall be ... sent to the exchange between the hours of 8.30am and 5pm on any business day unless unavoidably outside these hours. Announcements received up to 5pm will be released to the market and media on the day of receipt. Announcements received after that time will be held over until the following business day and shall not be released by the issuer to any other party, including the media, until 8.30am on the following business day."

The problem with that rule is that announcements are often sent to another party, the ASX, and its announcements platform is open from 8.30am to 8.30pm (or 10.30am to 10.30pm NZ time).

If the NZSE's platform also stayed open for 12 hours, or even if it delayed its closing until, say, 6.30pm, the problem would be largely solved since it would pick up announcements at both ends of transtasman trading hours.

As it happens, the NZSE is developing a new announcements platform, though Brown is noncommittal about whether its hours of operation might change.

"There are about 250 items on a list we are working through, including dual-listed stocks, hours of trading and the market announcement platform," he said," so I've no doubt that will be considered, though I don't know when."

The second event to demonstrate a divergence between the NZSE and the ASX involved Tower.

A few days after Tower put out a profit warning and had its share price slashed 44 per cent, cutting $276 million off the company's value, the NZSE formally asked if Tower had kept the markets fully informed about its looming crisis.

When Tower replied, on November 11, it sent a copy of the letter to the ASX, on which it is also listed, saying it was "for information".

The NZSE, not unreasonably, took a little time to consider Tower's response before making it public.

"In such cases," said Brown, "we feel the market is best served by studying the information provided to determine whether it provides an adequate answer.

"Putting a response directly into the market, when there may be unresolved issues, might just lead to further speculation."

The ASX had no such problem and distributed the response at 2.40pm (Australian time) on November 11.

Meanwhile, the NZSE was busy considering Tower's explanation - which it eventually accepted - and did not post it until 10.35am the following day.

In other words, rightly or wrongly, the ASX informed its investors what was going on 20 hours ahead of the NZSE.

That particular piece of news did not have any obvious impact on the market, but it could have, and once again New Zealand investors were left behind.

The NZSE has signalled its irritation at the letter being made public before there was time for it to be considered, but it should hardly have come as a surprise. The ASX has long made it clear that any material sent to it will be made public forthwith.

Fletcher Challenge was acutely embarrassed two years ago when it sent the ASX advance notice of the planned separation of the three letter stocks "for information" only to have it released.

If there were any doubts whether the immediate release policy applied to stock exchange inquiries, as Brown acknowledges, "They've made their policy very clear by their action." (Though it remains to be seen if the ASX will be so free about releasing responses to its own inquiries.)

So what is the NZSE going to do? This is, Brown says, another of that long list of issues under review.

For the time being, the new regime at the NZSE has the benefit of the doubt. There are many issues requiring attention and decisive action has already been taken on several.

But New Zealand investors are entitled to expect they will not be left trailing their Australian counterparts for too much longer.