Futures Exchanges
19. The Australian Securities Exchange (ASX) is the current market operator of futures and options trading and clearing services for the New Zealand market. These products are currently traded through the Sydney Futures Exchange and centrally cleared through SFE Clearing Corporation Pty Ltd. NZX currently has an agreement with ASX regarding derivative products on NZX traded securities. NZX has recently announced its intention to enter the futures market independently.
20. Registered securities exchanges and authorised futures exchanges are regulated slightly differently from each other under existing legislation. NZX currently operates a registered securities exchange and is seeking to develop its business by using its exchange to trade futures products. NZX has asked for the regulation of futures and securities exchanges to be aligned in the situation where an exchange is seeking to perform both functions, in order to reduce their compliance costs.
21. The Settlement Systems, Futures, and Emissions Units Bill aligns the regulatory environment for exchanges seeking to operate in both securities and futures markets by amending the Securities Markets Act 1988 so that an exchange registered under Part 2B of the Securities Markets Act may be registered either with respect to securities markets only or with respect to both securities markets and futures markets. This amendment does not affect the ability of an exchange to be authorised for futures trading only under Part III of the Securities Markets Act.
22. Part 2B of the Securities Markets Act provides a more prescriptive regulatory approval process than Part III and is therefore the most appropriate to apply to exchanges seeking to perform functions in both the securities and futures markets. An exchange registered for operating securities markets and futures markets under Part 2B, and whose conduct rules for futures markets have effect under Part 2B, will be deemed to be an authorised futures exchange under Part III of the Securities Markets Act. The Settlement Systems, Futures, and Emissions Units Bill also extends the exemption power in s36E of the Securities Markets Act to include futures markets under Part 2B.
23. New Zealand legislation currently only provides for the Securities Commission to authorise futures dealers, although there are class authorisations for the Sydney Futures Exchange under the Authorised Futures Dealers Notice (No 2) 2004 and for the NZX under the Authorised Futures Dealers Notice (No 3) 2004. The effect of these class authorisations is that person's approved by the Sydney Futures Exchange or NZX are authorised futures dealers. NZX is seeking to provide futures products on its exchange and has requested that the existing class authorisations be given the authority of legislation.
24. The Settlement Systems, Futures, and Emissions Units Bill provides that market participants who have been approved by an authorised futures exchange under its operating rules shall be deemed to be authorised to deal in futures contracts under section 38 of the Securities Markets Act. This does not affect the ability of the Securities Commission to authorise futures dealers independently, but codifies the existing class authorisation granted by the Securities Commission for the Sydney Futures Exchange under the Authorised Futures Dealers Notice (No. 2) 2004 and for the NZX under the Authorised Futures Dealers Notice (No. 3) 2004. Giving effect to these class authorisations in legislation makes it clear that there is consistent regulatory environment for any authorised futures exchange in this regard.
Back to Top