Recommendations
65. The Minister of Commerce recommends that Cabinet:
Policy
1. Note that the prior Cabinet decision confirming the ability to register the electronic transfer of securities and emissions units traded through a registered clearing and settlement system (CBC Min (07) 22/11) applies too narrowly to the products NZX is expected to settlement through their upgraded system.
2. Agree to extend the prior Cabinet decision confirming the ability to register the electronic transfer of securities and emissions units traded through a registered clearing and settlement system (CBC Min (07) 22/11) to any product cleared and settled through a designated system.
3. Note that Cabinet's prior decision to clarify definitions to make clear that an emissions unit is not a security (CBC Min (07) 22/11) has been given effect through amendments to both the Securities Act and the Securities Markets Act to ensure that trades in emissions units will not be inappropriately fettered by those two Acts.
4. Note that it is not currently possible to define which voluntary emissions unit registers meet standards acceptable to the New Zealand government but that Cabinet previously decided that it is not appropriate to limit the scope of emissions units that may be cleared and settled through a regulated clearing and settlement system (CBC Min (07) 22/11).
5. Agree to rescind Cabinet's prior decision to make a technical amendment providing that entry on an emissions unit register is prima facie evidence to title (CBC Min (07) 22/11) in order to avoid either regulating emissions units registers in the voluntary carbon market or restricting legislation to emissions units recognised by the New Zealand Emissions Trading Scheme.
Settlement Systems, Futures, and Emissions Units Bill
6. Note that Cabinet's prior decisions on settlement systems, futures exchanges, and technical amendments for emissions units (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).
7. Agree to give the Settlement Systems, Futures, and Emissions Units Bill category four priority in the legislative programme: to proceed to a select committee in 2008, since it is no longer possible to pass the Bill in 2008 without compromising the select committee process.
8. Note that the Settlement Systems, Futures, and Emissions Units Bill: signals that trades in securities and other products can be cleared and settled in New Zealand through systems that meet the expectations of international and domestic participants; reduces compliance costs by aligning the regulation of exchanges seeking to operate in both the securities and futures markets; and enacts that participants approved by the operator of an authorised futures exchange are authorised futures dealers.
9. Note that the Settlement Systems, Futures, and Emissions Units Bill makes technical amendments that clarify the regulatory treatment of emissions units to support the trading of emissions units and the development of the market for emissions units.
10. Approve the introduction of the Settlement Systems, Futures, and Emissions Units Bill to Parliament.
11. Agree to introduce the Settlement Systems, Futures, and Emissions Units Bill to Parliament following confirmation that there is sufficient support for introduction at caucus.
12. Agree that to propose that the Settlement Systems, Futures, and Emissions Units Bill be referred to the Finance and Expenditure Select Committee for consideration.
New Zealand's approach to clearing and settlement
13. Direct the Minister of Commerce to report back to Cabinet in March 2009 on recommendations arising from a policy review of New Zealand's approach to clearing and settlement.
14. Note that it is unlikely that the policy review of New Zealand's approach to clearing and settlement will result in any recommendations for the Settlement Systems, Futures, and Emissions Units Bill itself.
15. Note that Cabinet previously directed Ministry of Economic development officials to undertake scoping and report back to the Minister of Commerce on further work required in the 2008/9 year in relation to whether the new regime should remain opt-in or become mandatory for trading in emissions units and whether the regime should be opened to clearing and settlement in relation to products other than securities and emissions units (POL (07) 382)
16. Agree that the report back in recommendation eleven is no longer relevant in the context of a broader policy review of New Zealand's approach to clearing and settlement.
Publicity
17. Agree to release this Cabinet paper on the Ministry of Economic Development's website.
18. Note that the Minister of Commerce will issue press statement(s) when the Settlement Systems, Futures, and Emissions Units Bill is introduced to Parliament and to announce the process of engagement with stakeholders in determining a New Zealand approach to clearing and settlement.
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