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NZX Looks At Allocation Of Regulatory Functions

Fuseworks Media
Fuseworks Media

Wellington, Aug 24 NZPA - Stock exchange operator NZX is raising the possibility it could step back from some of its regulatory and supervisory functions.

The ideas are included in a discussion document, on the allocation of some regulatory functions, prepared by NZX as part of the Capital Market Development Taskforce process to produce a plan to develop this country's capital markets.

The NZX paper, published today, suggested "potential proposed changes" which, if they were to be implemented, would likely need an overall redesign of the regulatory framework.

The proposals include removal of NZX from the area of supervising the advice component of NZX participants, with that function potentially moved to the Securities Commission.

It was also suggested NZX could be removed from the area of supervising the prudential capital and client funds areas of NZX participants, potentially moved to the Reserve Bank.

NZX's enforcement function could be removed, with it moving to either the Securities Commission or a newly formed body focused only on enforcement.

Approval of capital raising documentation could be consolidated between the Securities Commission and the Companies Office, with NZX's role clarified and limited to listing rules such as they may differ from legislation in certain respects.

It was also suggested that the scope and remit of oversight reviews across NZX and potentially other regulators could be clarified.

The paper said NZX was comfortable with its current set of regulatory and market supervision responsibilities.

But it believed that, under certain circumstances, certain parts of its regulatory functions may be better discharged by other, existing or new, regulatory institutions or institutional arrangements.

Taskforce chairman Rob Cameron said debate about the optimal scope and role of exchanges in regulation was under way around the world.

"We realise that this is a complex issue -- NZX undertakes a wide range of different regulatory functions, some of which are inherent in being an exchange," Mr Cameron said.

"The appropriate location of each of these functions needs to be assessed against a clear and rigorous set of principles."

The principles in the NZX document would allow the taskforce to apply the same kind of analysis across the entire capital market regulatory landscape.

The taskforce would need to consider the full set of regulatory arrangements across the capital market, although there was no suggestion urgent change was needed, Mr Cameron said.

In Australia it is planned that the market regulator will take over supervision of trading on the Australian Securities Exchange (ASX), the first step in a government plan to clear the way for rival trading platforms to set up.

Before considering applications from potential rivals to the ASX, the government wants to centralise trading supervision in the hands of the Australian Securities and Investments Commission (ASIC), the government said in a statement today.

If legislation is passed, starting in the third quarter of 2010, ASIC will be responsible for both supervising and enforcing laws against misconduct on Australia's financial markets. Currently, individual markets, like ASX, self-supervise trading.

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