FMA approves NZX's new growth stocks NXT market

Monday 29th September 2014

The Financial Markets Authority has approved the NZX's new NXT market for high growth or "momentum" stocks, with the stock market operator expecting it to launch later this year.

The regulator's approval was the last sign off the Wellington-based stock market operator needed for its new market it said in a statement. NXT is intended to lure more small-to-medium sized firms to the bourse with less costly and simpler disclosure rules, filling a funding gap for mid-cap growth stocks that was first identified in the 2009 Capital Markets Development Taskforce led by investment banker Rob Cameron.

The alternative disclosure regime will see companies use key operating metrics to outline their business performance and will have a higher threshold on what information triggers market disclosure than exists in the current continuous disclosure regime. NXT will ultimately replace the decade-old secondary board, NZAX, for which no new additions will be accepted once the NXT platform is up and running.

The market has a separate website and branding from the NZX, as well as a risk warning where investors are informed of the differences between the new market and other NZX markets. NZX said the NXT launch will depend on companies being ready to list, but expected it to be before the end of the year. The NXT market rules will be live on its website tomorrow and investors will be soon able to register for a reference number showing they understand the risks, it said.

The NXT market will provide investors with company research and guaranteed "market-makers" to further promote confidence and liquidity on the new bourse. Listed companies will have to appoint independent directors and a dedicated 'sponsor' to provide an advisory role for the first three years of listing. NZX will also have the right to refuse a listing and companies must show the operating metrics chosen do accurately measure the company's performance. New market companies will also be required to graduate to the NZX's main board once they reach a certain size.

In July, Commerce Minister Craig Foss granted a ministerial exemption allowing a less-onerous disclosure regime for NXT. The ministerial exemption will apply under the Securities Act until December, when the Financial Markets Conduct Act comes into full effect. Cabinet has agreed to enact regulations to allow the exemption under the new law.

Shares of NZX rose 0.8 percent to $1.26, and have advanced 0.8 percent this year.

BusinessDesk.co.nz

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