Legislative Implications
48. Cabinet's 2007 policy decisions (CBC Min (07) 22/11 and CAB Min (07) 44/4b) were initially developed into the consultation draft Emissions Units, Settlement Systems, and Futures Bill, which was prioritised as category two in the legislative programme i.e. must be passed in 2008 (CAB Min (08) 6/3A).
49. Consultation on a draft Emissions Units, Settlement Systems, and Futures Bill revealed that the majority of stakeholders were critical of the consultation and policy development process, requesting more time to make comments, wider consultation, workshops and additional consultation documents. A significant proportion of submitters expressed concern that legislation was drafted solely to further NZX's commercial interests.
50. It is not realistic to enact the Settlement Systems, Futures, and Emissions Units Bill in 2008 without compromising the select committee process, the quality of resulting legislation, and the opportunity for input from affected industry participants. This paper therefore seeks agreement to prioritise the Settlement Systems, Futures, and Emissions Units Bill as category four in the legislative programme: to proceed to a select committee in 2008.
51. NZX's upgraded settlement system is still under development. In a recent meeting with Ministers NZX's CEO said that the new system may not be operational until April 2009. Once the Settlement Systems, Futures, and Emissions Units Bill is enacted, NZX will still need to undergo a designation application and approval process with the joint-regulators, although NZX intends to submit some of the necessary application documentation in advance. While NZX currently operates a settlement system without designation, NZX advises that they will not be able to operate a central counter party without designation because they will have difficulty accessing the necessary synthetic capital required to support this model of settlement.
52. The Settlement Systems, Futures, and Emissions Units Bill provides a number of technical amendments to existing legislation. There is nothing in the Bill that is necessary for the operation of the New Zealand Emissions Trading Scheme. However, in Part I of the Settlement Systems, Futures, and Emissions Units Bill, some of the proposed amendments to the Personal Property Securities Act 1999 are already contained in similar, but not identical, form in clause 65 of the Climate Change (Emissions Trading and Renewable Preference) Bill (as reported back to the House by the Finance and Expenditure Committee in June 2008). This part may therefore require amendment in the future in order to reflect the ultimate wording of the related clauses of the Climate Change (Emissions Trading and Renewable Preference) Bill.
Fiscal Implications
53. The Settlement Systems, Futures, and Emissions Units Bill creates additional functions for the Reserve Bank of New Zealand and the Securities Commission with respect to designated settlement systems. These functions complement existing functions and should largely be absorbed within the agencies' existing baselines (noting also that the Bill provides for the Reserve Bank and the Securities Commission to charge fees for applications and variations under Part 5C of the Reserve Bank Act). The Settlement Systems, Futures, and Emissions Units Bill also expressly allows each joint regulator to have regard to work produced by the other to ensure that cross-agency synergies can be effectively captured.
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