NZSE Pleased With Demutualisation Bill Progress

Chairman Mr Simon Allen said today that the Exchange was pleased to see the Bill back from the Select committee. "The Exchange has worked closely with the Select Committee members to develop legislation which satisfies the Committee regarding the appropriate regulation of NZSE, operating as a demutualised Exchange, and meets the objective of the Exchange to facilitate restructuring to meet the needs of a dynamic market."

The Finance and Expenditure Select Committee reported the Bill back to the house today with four key amendments:

• A Change to the qualifying date from 16 August 2000 to 15 February 2001;
• A control cap to be set by Order in Council rather than the NZSE;
• Exchange rules to be subject to approval by Order in Council, based on a public interest test; and
• Ability for the government to veto any subsequent rule changes.

Mr Allen said that the changes would support the fundamental objective of the Bill to enable the NZSE to demutualise, with appropriate regulation, and become a public company operating under the Companies Act, with more flexibility to meet the demands of the market for services.

"Restructuring the NZSE as a properly constituted and capitalised public company, listed on itself, is in our view the best way forward and will enable the Exchange to more actively invest in the development of the capital markets through the provision of more and better services."

It would also enable the separation of ownership and provision of investment capital for the stock market with the consequent advantages of widening the potential capital base, providing market participants with greater opportunity to have an ownership involvement in the Exchange, improving accountability and efficiency of service pricing and use of investment capital.

Mr Allen said that the current mutual structure did not allow for this since the beneficiaries were members and returns were applied to members through low transaction charges.

"Operating as a Listed Company under the new regulatory structure will provide certainty for the Exchange as well as greater flexibility in the range and nature of services that the Exchange can provide," Mr Allen said.

• "The statutory and contractual framework will provides certainty as to the rights of owners and provides incentives to ensure the Exchange enhances its customer focus."
• "As the new Exchange company seeks to improve services to the capital market, the NZSE Listing Rules ensure a high level of corporate governance, and the independence of the Market Surveillance Panel, in dealing with matters where the Exchange is conflicted, will ensure proper accountability."

Mr Allen said the Annual Meeting of the NZSE in October would now not be able to consider the demutualisation proposal.

It was anticipated that the legislation would now be passed in November and an extraordinary meeting will be scheduled after the legislation is passed.

"The demutualisation could now not practically take place until next year," Mr Allen said.