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Wednesday, 15 September, 2010 |
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The settlement of equities in the New Zealand market has always had its idiosyncracies but the launch of the New Zealand Clearing and Depository Corporation has failed to address one major issue.
NZX rules require broker-to-broker trades to be settled using the NZX FASTER system. This required securities to be uplifted from NZCSD for settlement in FASTER, and re-lodged back into NZCSD either by electronic or paper-based transfers. The underlying broker-to-custodian trades and other off-exchange deliveries are settled in the NZCSD NZClear system.
NZX have just launched the New Zealand Clearing and Depository Corporation, encompassing a central counterparty (NZ Clearing) and a depository (NZ Depository). The benefits of a CCP for on-exchange trades are well-understood - improved clearing efficiency and enhanced counterparty risk measures, among others. This, however, does not address the ongoing issue of having two separate settlement systems for equities in the market!!
One possible solution would be the closer integration between NZX and the Reserve Bank of New Zealand (operator of NZClear) but discussions between RBNZ and NZX concerning a joint-venture have yet to bear fruit!! So for the foreseeable future, investors in NZ will just have to deal with the dual equities settlement system...
Barry Morales, Senior Analyst, Asia Pacific
bmorales@thomasmurray.com |
