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NZX eyes flatter market structure with broader range of products in listing rules proposals

Wednesday 27th September 2017

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NZX wants a more streamlined marketplace that's easier and cheaper to use for listed issuers and able to accommodate a broader range of products in its favoured proposals to change the bourse's listing rules. 

The Wellington-based stock market operator today released a discussion document with its preferred route of action in changing the listing rules, which would drop the small-cap NZAX and NXT markets and introduce more flexibility around disclosure on the main board. Submissions are due by the close of business on Nov. 17 with a second round of consultation set for April next year and the new regime in place in the fourth quarter of 2018. 

"We are seeking to establish a modern set of listing rules that are easier for our listed companies to understand and apply, while appropriately protecting our investors to increase confidence and participation in New Zealand's markets," general counsel and head of policy Hamish Macdonald said in a statement. "NZX is exploring options to further develop the New Zealand capital markets, and our listing rules need to support this by better accommodating a broader range of financial products and removing unnecessary compliance costs for companies." 

NZX signalled an overhaul of the listing rules in June when it said a consolidation of the three equity markets was on the cards when announcing the review. The stock exchange operator updated its governance code and its participant rules earlier this year and is currently in the process of reviewing the broader shape of its business. 

The listing rules review aims to encourage a broader range of investors participating in the local market, which would boost liquidity, cut the cost of capital for listed firms, and provide stronger investor protection, the document said. 

The proposed new structure of the equity market would see two tiers of issuer on the main board with slightly different requirements for smaller equity issuers, such as using NXT's key operating metrics as a pathway to building a stronger culture of disclosure for earlier stage companies. 

The document said its three existing equity boards aren't meeting the needs of smaller companies, and NZX holds the view that different settings can be achieved in a less complicated market structure. 

NZX hopes to reduce compliance costs for issuers by making it easier to manage disclosure obligations with greater support, streamlining processes such as capital raisings for issuers which reduces the expense of external advisers including law firms and underwriters. 

The other leg to the listing rules rewrite is to enable a broader range of products, with the existing framework hindering the listing of managed funds on the bourse. It's considering creating bespoke rules for managed investment schemes to encourage an area "which is under-developed compared to global peers and presents a strong opportunity for market development." 

The company also wants feedback on whether there's demand for listing depository receipts, which are securities typically backed by a foreign-listed company's shares. 

"NZX is in the unique position of being the first market in the world to open for trading each day," the paper said. "This provides an opportunity for trading in depository receipts of overseas listed securities prior to other markets opening, and has the potential to provide more investment opportunities to New Zealand investors." 

The company's shares dropped 1.7 percent to $1.17, and have gained 13 percent this year. 


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