NZX publishes regulatory agenda, aims to improve processes in 2016

Rick Steves

The New Zealand Exchange, NZX, has published its new regulatory agenda, stating a focus on increasing risk assessment of market participants and assessing brokers and fund managers’ practices in order to be able to detect potential market misconduct. Market infrastructure, orderly markets, and market engagement are they key areas where the regulatory program lies, reflecting […]

NZX publishes regulatory agenda

The New Zealand Exchange, NZX, has published its new regulatory agenda, stating a focus on increasing risk assessment of market participants and assessing brokers and fund managers’ practices in order to be able to detect potential market misconduct. Market infrastructure, orderly markets, and market engagement are they key areas where the regulatory program lies, reflecting current economic environment and statutory obligations.

‘Market infrastructure’ refers to: “NZX rules and market architecture balance the need for informed, confident participation in our markets, with the efficient operation of those markets”; ‘orderly markets’ stands for: “Comprehensive and effective frontline monitoring and enforcement of trading misconduct, and understanding of permitted trading conduct by market participants”; and ‘market engagement’ means “constructive engagement with issuers and participants, to support compliance frameworks, organizational culture and market conduct”.

“NZX’s regulatory function contributes to the operation of ‘fair, orderly and transparent’ markets, to the ongoing development of New Zealand’s capital markets, and ultimately to lowering the cost of capital for issuers”, said NZX’s Head of Market Supervision Joost van Amelsfort.

“To be an effective regulator, NZX Regulation takes a proactive approach to addressing market trends, changes in technology and law and developments in international best practice. The NZX Regulatory Agenda reflects the focus and investment we place on effective oversight of our markets.”

“This agenda also provides further transparency to the market in terms of the matters NZX Regulation is currently focussed on, to help drive engagement with those participating in New Zealand’s capital markets”, Amelsfort concluded.

Market infrastructure work has already begun as the NZX sought feedback in November for a proposal to broaden corporate governance rules for main board-listed companies. That would include a more specific code of ethics for senior managers, responsibilities of directors and rules to cover whistleblowers.

Aiming to put in practice reporting requirement amendments by the end of the year, the NZX is looking to discuss proposals between July and September. A broader review of NZX Main Board/Debt Market rules should also have its place this year, with improved and simplified processes that respond to domestic and international regulatory changes, and also market participant rules.

The NZX also aims to publish a revise guide on market manipulation and ensure participants understand the parameters of permissible trading conduct. “Real-time” risk assessment will become a regular practice along with existing annual and on-site or desk-based inspections.

The interaction between the exchange and the New Zealand Financial Markets Authority (FMA) should improve in order to reduce duplication, as both bodies have regulatory roles in relation to brokers.

Quality of issuer disclosures and practices relating to the timing of announcements to the market will be subject of more focus, increasing broker engagement and a more risk-based approach to its review of compliance in documentation.

To see the NZX’s Regulatory Agenda 2016 document, click here.

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