The CCH is designed to ensure that New Zealand's capital markets maintain their integrity, are immunised from failures and outages in other parts of the securities landscape, and protect New Zealand's reputation as a destination for international capital.
"The current on-register system is structurally flawed as it creates many more points of susceptibility, potential failure and disruption than exist in a self-contained system," said Chris Corke, NZX CIO. "The proposed CCH facility will provide greater certainty and security for New Zealand's markets and eliminate the cause of many of the more recent closures. This is obviously critical for us if we want to avoid negative impact on our reputation both here and abroad," said Corke.
The proposed new CCH system would see NZX extend its clearing and settlement capacity to include a snapshot of each issuer's security holders (and their holdings) which would be uplifted from the relevant registry immediately prior to the opening of trading. All trades in each issuer's securities during trading hours will be recorded in the CCH Facility and a record of the revised security holding data will be downloaded to the relevant register of that issuer at the close of trading.
NZX intends to work with the appropriate groups including listed companies, brokers, registries and other interested parties towards defining and implementing a CCH Facility solution as soon as possible.
"The proposed CCH Facility would bring New Zealand's capital markets significantly more into line with peer international markets, including Australia, which runs a system very similar to that which NZX is here proposing and fit with IOSCO principles," said Mark Weldon, NZX CEO. "This type of system is internationally accepted, and indeed viewed favourably in terms of investor protection, because there is no inherent need for trading to be linked in real time to each issuer's individual registry," said Weldon.
NZX is releasing a proposal and consultation paper and is seeking public comment on the proposal and proposed Listing Rules changes that may be required. While NZX is anticipating at this stage that NZX will fund the entire development costs, NZX is seeking public comment on funding of the development and pricing of the final solution. NZX does not anticipate that this will add additional cost to market participants.
The proposal can be downloaded at www.nzx.com/aboutus/reports.