Executive Summary
2. The proposals in this paper reform the law regulating futures exchanges and clearing and settlement systems so as to facilitate a more robust legislative framework that meets the expectations of potential international participants.
3. NZX has indicated that it wishes to establish an emissions trading platform (called 'TZ1'). They have identified a first mover advantage that would be available to any person in the region who can establish an efficient and robust emissions trading platform. NZX plan to launch their emissions trading platform in mid 2008 (expected May 2008) and would prefer to have the necessary legislative amendments in place by then (or alternatively at least progressing through Parliament so that it can be passed before the end of the current parliamentary term), in order to provide their platform with the international credibility that comes with the regulation of trading functions. Officials expect legislation to be drafted by the end of 2007 for introduction to Parliament in February 2008.
4. The proposed reforms involve:
- rationalising the regulatory framework for securities and futures exchanges – these are desirable from a policy perspective to provide for simpler administration of the regime, but are not legally necessary to allow establishment of a futures exchange or clearing and settlement system;
- amendments so that the New Zealand regime for clearing and settlement systems better conforms with IOSCO recommendations – these are considered commercially necessary to give the platform international credibility and thus make it more attractive to potential international participants; and
- technical amendments in response to the emergence of emissions units in New Zealand (both NZ ETS units and non-NZ ETS units), and the way they fit into New Zealand's current regulatory environment.
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