30 Jun 2021

NZX earns praise over creation of separate regulatory body

3:28 pm on 30 June 2021

The Financial Markets Authority (FMA) is encouraged by steps the stock exchange has taken to mitigate conflicts of interest and improve market surveillance.

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The FMA's annual review of the NZX did not cover the market operator's technology woes. Photo: Supplied / NZX

In its annual review of the NZX, the authority said it was pleased that it had fulfilled its market obligations.

The FMA's director of capital markets, Sarah Vrede, said the establishment of a separate regulatory arm from the NZX's commercial operations had gone a long way to manage concerns about potential conflicts of interest.

"The model hasn't been around and up and running for very long yet, but our initial assessment is that the design and execution of RegCo has gone well," she said.

"It puts in place an improved structure over the previous structure in terms of creating greater independence."

Vrede recommended that NZX and NZ RegCo create clear policies on how they would manage issues that would naturally cause tension, such as new companies' listings.

The report also found that RegCo having its own monitoring tools and regulatory teams ensured investigations into continuous disclosure issues were comprehensive.

NZX chief executive Mark Peterson said it was pleasing to see acknowledgement of the improvements made to its regulatory arrangements and monitoring under the new NZ RegCo operating and governance model.

Technology review

The FMA's annual review of the NZX did not cover the market operator's technology woes, which were covered in a specific report earlier this year that identified a number of failures in the NZX's digital systems.

The authority signed off on the NZX's action plan to address the issues and Vrede said it was receiving monthly updates on its progress.

"[The NZX] did some very early work responding to the initial causes of the outages and the other parts of the action plan will go on for some time," she said.

"We have no reason at this stage to have concerns about NZX delivering on the action plan.

"We are anticipating we would have an update in next year's annual review," she said.

Peterson said implementing the actions agreed to with the FMA remained a top priority for the company.

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