Cactus Kate on NZX

Cactus Kate has done a very lengthy and detailed post on the conflicts of interest around NZX as both a regulator and a commercial player. Her summary is:

  1. NZX is privy because of their Regulatory position to information that makes them a trusted source.
  2. NZX charges for dissemination of this information to the marketplace and generates 45% of its operating revenue in this fashion.
  3. NZX is spreading its Regulatory role of a trusted source collector and disseminator of this information into commercial publications it is planning to purchase.
  4. NZX has had no permanent Head of Supervision for a year and it is arguable that this person is truly independent anyway.
  5. NZX claims that its Supervisory and Commercial operations are “quarantined”.
  6. NZX Supervisory staff have been financed into an employee share scheme. The NZX CEO is according to the latest accounts, the third largest shareholder in the company and has a sole financial incentive to increase the earnings per share to receive more shareholding.
  7. The Securities Commission has previously raised issues of conflict with respect to NZX.
  8. The Securities Commission is over stretched and under resourced, more so due to recent finance company issues.
  9. The Securities Commission has called internationally for independent, strengthened, and well-funded regulators for implementation at the domestic leveldue to recent subprime crisis issues.
  10. The NZX CEO has a new politicised role and is seen by political advisors as having large influence on John Key.

I suspect we will see ongoing scrutiny.

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