NZSE CEO looks ahead of tomorrow's demutualisation vote

By NZPA

Tuesday 15th October 2002

The head of New Zealand's stock exchange is looking ahead of tomorrow's vote to demutualise, and hopes to build up the exchange's relationship with brokers

NZSE chief executive Mark Weldon said he was optimistic the exchange's 300-plus members would vote in favour of restructuring it into a limited liability company, in preparation to listing on its own exchange.

"Tomorrow I hope the demutualisation vote will be positive, and then going forward the exchange will work in cooperation with the broking community," Mr Weldon told an Institute of Chartered Accountants' meeting in Wellington today.

Other than the high-profile global institutions, which had quit New Zealand in droves in the past year, brokers had to work hard to make their names familiar to the public.

Within the last week two New Zealand brokers have announced mergers, with Direct Broking absorbing fellow sharebroker DF Mainland, and First NZ Securities combining with First NZ Capital, which emerged from the New Zealand exit of Credit Suisse First Boston.

Although brokers would have to be a minimum size, more importantly they had to push their visibility as, unlike the United States where street-level brokerages were the norm, they tended to be inaccessible, Mr Weldon said.

New Zealand's approach to capital markets was very different to that of the US, where companies defined themselves by listing on the stock exchange.

"Here, traditionally people have been very scared of it, so we need to make it more palatable and understandable in the long run."

Mr Weldon said the exchange had spent a lot of money developing the New Capital Market, launched in 2000 to help fledgling companies onto the main board, but had put little money into attracting the companies.

Since picking up the reins in June, Mr Weldon has tried to allay broker criticism over the NCM and the proposed merger with the Australian Stock Exchange last year.

"The Australian Stock Exchange proposal which came through last year was very much...buying the NZSE for a very nominal sum. Trading would largely have been done in Australian dollars, and it would have been based in Sydney..."

Only 10 or 15 of the biggest companies would have benefited from the Australian proposal.

"For companies that are not of a size that have international exposure, and in particular companies that are not even listed yet, having everything centralised on a profit-maximising basis by a company in Sydney would have been pretty damaging for us."

A merger was unlikely to be revisited in the previous form, which was roundly criticised by some brokers at the time as a takeover.

"Under those conditions it is off the table..." he said.

Seventy-five percent of the exchange's members have to vote in favour tomorrow for the NZSE to proceed with demutualisation.

While a number of members were concerned at the NZSE's lack of disclosure and appeared likely to vote against the proposal, the larger broking institutions were expected to carry the vote.

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