Launch of NZAX

  • Lianne Dalziel

Thank you for the invitation to take part in the official launch of the New Zealand Exchange's new alternative market, the NZAX.

Securities markets have a critical role in fostering business growth and economic development, and there is a clear role for a facility such as the NZAX that is designed to cater to small or non-traditional enterprises.

The conventional market or securities exchange is typically suited to larger, traditionally-structured companies. As a result, smaller or non-traditional companies and their investors may be denied the benefits of a market for their securities, that does not impose the same regulatory framework that a conventional exchange requires.

By focussing on providing a market for New Zealand’s small and medium-sized companies to list securities and raise capital for growth, the NZAX will be a valuable addition to New Zealand capital markets.
There are over 270,000 small and medium-size businesses in New Zealand, which contribute over one-third of the total output of New Zealand's economy, and it is important that their capital needs are able to be met.

NZX has taken a variety of important steps to ensure that the NZAX is able to meet its intended goals. However, I consider two factors in this regard to be of particular importance.

First, the NZX is able to provide this new market facility at a comparatively low cost through a variety of mechanisms. Namely, in particular, actively seeking a Securities Commission exemption from the full prospectus requirements, the innovative sponsor role, which is designed to assist businesses access cost-effective information and support needed to become compliant with requirements, and the lowering of the fees.

The second factor is the regulatory structure surrounding the NZAX which is designed to ensure the integrity of, and investor confidence in, the new market.

The Securities Markets and Institutions Bill, enacted into law late last year, introduces a co-regulatory framework for markets in New Zealand. In this regulatory model, the exchange fills a key role as the "front-line" regulator, responsible for monitoring and controlling conduct that occurs within its markets, subject to the oversight of the Securities Commission.

In this respect, NZX is responsible for a variety of important functions, namely authorising intermediaries to trade on its markets, monitoring the activity of those intermediaries and taking appropriate enforcement actions where necessary. It is also responsible for monitoring the conduct of its listed companies, including ensuring ongoing information disclosure.

In order for this model to work successfully, an exchange such as the NZAX must have an effective set of rules governing the behaviour of its participants. The regulatory framework established by the Securities and Markets Institutions Bill therefore provides for a rule approval process, where the proposed rules of a market are evaluated to ensure they are not contrary to the public interest.

The NZAX rules are essentially very similar to the existing rules for the main board, and establish a variety of requirements such as disclosure requirements, provisions for listing and the responsibilities of entities once listed.

However, some differences are introduced that are designed to facilitate the goal of providing a market for smaller and non-standard companies. Following public consultation by NZX, and consideration by the Securities Commission, I was able to recommend that the NZAX rules be approved. I am confident that the rules will aid the NZAX reach its intended goals and assist in preventing market abuse.

As the Minister of Commerce, I have a statutory role in the establishment of new securities markets and registered exchanges, I have been kept well-informed of progress in the establishment of the NZAX and I am confident it will make a very important contribution to New Zealand's financial markets.

I would like to offer my congratulations to NZX on progressing this project through to fruition, and to the First XV, who have chosen to take advantage of the benefits of the NZAX. I look forward to the growth of the NZAX market and its listed companies, and hopefully we will see some of them shift to the main Board overtime.