FMA gives NZX clean bill of health for its regulation of markets

Tuesday 26th May 2015

The Financial Markets Authority has given New Zealand's markets operator, NZX, the thumbs up for the way it has complied with statutory obligations to run the markets in a fair, orderly and transparent way and for the first time has made no recommendations for changes.

In the fourth annual review of NZX’s general obligations, the FMA said it was satisfied the company had completed all but one of the 11 agreed actions from last year related to managing conflicts of interest, monitoring conduct, and enforcing compliance and was now carrying out its role as a frontline regulator effectively.

The final agreed action from last year’s report, to review the penalty structure within the Tribunal rules for minor breaches of market rules, is underway.

The FMA said since last year’s review, processes have been introduced to improve discussion and cooperation between the two market regulators, including the signing of a Memorandum of Understanding that takes into account their complementary responsibilities and discussions on how NZX carries out its day to day regulatory functions.

“We are confident that this closer working relationship and the actions taken by the NZX since the last review have further strengthened its arrangements for handling conflicts, monitoring conduct and enforcing compliance," said FMA head of markets oversight Gareth Stanish. "NZX has also shown a commitment to continuous improvement in its regulatory functions and capabilities."

The FMA said it was satisfied the other 10 actions taken will allow greater visibility and market awareness of NZX’s regulatory activities. “We believe this will help increase market confidence in NZX’s effectiveness as the operator and frontline regulator of New Zealand’s licensed financial products market,” it said.

Changes made to NZX’s internal processes include introducing a case management system for market services and regulation which enables information sharing, internal referrals and managerial oversight and reporting. The market participant inspection programme has also been revised and updated and more work has also been done on ensuring accurate identification and labelling of price sensitive announcements, it said.

There was a higher workload in the regulation and policy teams during 2014, largely due to more listings and the development of the NXT market.

Technological problems that saw five disruptions to the trading system in the first half of last year were investigated and permanent solutions introduced, the review said.

The annual review covers the 2014 calendar year and reporting on the NZSX, NZDX, NZAX and FSM markets. The next will be completed under the Financial Markets Conduct Act which fully came into force in December and will include the NZX’s new NXT market.

BusinessDesk.co.nz

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