New Zealand stock exchange shelves central clearing house plans

New Zealand stock exchange shelves central clearing house plans

The New Zealand Exchange (NZX) has postponed plans to establish a central clearing house (CCH) for share ownership changes for at least a year.

NZX put forward plans in March this year to develop a CCH in a bid to eliminate trading glitches caused by its current system where share registries track movements in stock holdings.

The exchange has been forced to abandon trading on a number of occasions due to connectivity problems with share registries. Earlier this year the NZX was forced to halt trading after its network was unable to connect with share registry, BK Registries.

Connectivity glitches also stopped trading at the exchange last year when problems with a software upgrade at an associated share registry meant that NZX was unable to confirm that transfers of shares were being recorded. At the time NZX said the inability to confirm trades against holdings compromised the integrity of the market.

The exchange originally proposed a CCH to allow access to shareholder balance information and to record settled trades during the course of a trading day. But the exchange has back-tracked after consulting with interested parties including registries, issuers, sub-custodians and member firms.

NZX says it has invested heavily in technology to improve market reliability since the market outages and registries have also committed to technology improvements.

Elaine Campbell, head of regulatory and public policy, NZX, states: "We have agreed not to proceed with the CCH at this time, in order to give registries the opportunity they sought to demonstrate the effectiveness of improvements they have made to their technology."

Campbell adds that registries accountable for technology improvements via a set of service level agreements.

NZX says will monitor the situation for a further 12 months before it makes a final decision on provision of a CCH facility.

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