Commenting on yesterday’s final recommendations from the Capital Market Development Taskforce, Unlisted Chairman Bevan Wallace said “Unlisted wholeheartedly supports the taskforce’s “big ticket” recommendations to facilitate the development of deeper, broader and more liquid capital markets and more lightly regulated exchanges like Unlisted. This is welcome news as Unlisted celebrates its sixth anniversary of operations. “For example, the partial privatisation of SOEs, a consolidated capital markets conduct regulator and the official endorsement of a “stepping stones” model to public capital markets make intuitive sense and are likely to contribute to the overarching aim of improving economic performance. “Unlisted has been promoting the “stepping stone” model for several years now, and while official recognition and endorsement for Unlisted and its place in the capital markets landscape may be overdue it is a positive step for current and prospective issuers. “Having said that, Unlisted does have some reservations about the move to allow registered exchanges to own and operate unregistered and exempt exchanges. That would unnecessarily blur the distinction between exchanges and risk an unacceptable level of investor confusion, and in our view should not make its way into law. “Current Securities Markets Act regulations prevent the operator of one type of exchange from operating the other, meaning NZX can’t operate an unregistered market and vice versa. Unlisted has spent the last six years educating market participants about the regulatory distinction and we believe issuers, brokers, investors and corporate advisors are generally now clear on what Unlisted does and does not provide for issuers and their shareholders. In our view, extending the reach of registered exchanges into the unregistered space provides no obvious added benefit to the capital markets in general, yet introduces the real risk of investor confusion. “Unlisted has the same goal as the taskforce of seeing more companies trading in public secondary markets in order to give investors greater choice and issuers better access to capital. However that goal can be pursued without the risk of creating confusion about the statutory investor protections that do or don’t apply to issuers on particular exchanges. “If NZX were permitted to operate an unregistered market then the current uncertainty around the rules as between NZX and NZAX would be amplified. The resulting confusion would jeopardize the standing of unregistered market operators generally. When taken together with potential anti-competitive consequences of an NZX unregistered platform operating on less than arms-length terms, Unlisted is not convinced that such developments would be in the interests of our economy or capital markets. “Recommending to broaden an incumbent monopoly’s options runs counter to the aim of officially endorsing the unregistered exchange model as a means of providing greater issuer and investor choice. In light of anecdotal evidence of one or two listed issuers struggling to move off the registered exchanges, we would be concerned about steps that made moving between exchanges any more difficult than it already is. In our view, if in the future we hope to see real competition between securities exchanges an independent party must oversee applications to delist from a registered exchange so that barriers to customer switching are minimised. “Rather than broadening the scope of NZX’s business operations for some undefined “greater good”, we support the Taskforce’s view that clear benefits would accrue to shareholders, the capital markets and the New Zealand economy in general through the implementation of its recommendations around ensuring that securities markets rules, regulations and sanctions are appropriate and vigorously enforced. “Overall Unlisted applauds the majority of the Capital Market Development Taskforce’s recommendations ...