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NZX moves to clean up Index memos

Friday 5th March 2010

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NZX will stop issuing "Preliminary Index memos" about likely changes to the composition of its NZX 50 Index as a result of a process review on issues that are being investigated by the Securities Commission, at NZX's request.  

The change follows a 23% rise in the Allied Farmers share price following a notification to paid subscribers on February 15 that was subsequently rescinded the following Friday, leading to an immediate 11% fall in Allied’s price. The shares weakened 3.8% to 7 cents today.

Regulatory focus is on NZX's obligations to notify all market participants simultaneously of material, or potentially market-moving, information.

Allied chief executive Rob Alloway complained publicly about his company's treatment, and NZX CEO Mark Weldon said on breakfast television earlier this week that handling of the issue had been "far less than perfect."

 NZX said in a statement today that, in future, "the only index memo released will be the final index memo," and seven trading days will be allowed to elapse before any announced change to the index occurs.

"For monthly Index memos, the release will allow for five trading days to take place prior to any actual change in the Index occurring," NZX said.

A review index methodology was also occurring, and among areas being assessed were inclusion criteria and share price floors.

The methodology review will be conducted over the next 30 business days, and a consultation draft on any proposed changes released for feedback at that time," NZX said.

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