Legal protection for NZ settlement systems

Legislation providing legal backing for settlement systems - a key part of the infrastructure underpinning New Zealand's financial markets - was passed by Parliament last night.


Settlement systems are used to transfer the ownership of an asset, such as shares, or commodities like oil.


The Settlement Systems, Futures, and Emissions Units Bill was split into four bills at the Committee stage: Reserve Bank of New Zealand Amendment Bill, Securities Markets Amendment Bill, Personal Property Securities Amendment Bill, and Securities Amendment Bill.


"It provides settlement systems with the option to apply for designation, which gives the system additional legal protections in return for meeting regulated standards," Commerce Minister Simon Power said.


"Efficient clearing and settlement infrastructure is necessary for a financial system to perform well. These systems support product innovation and risk management."


New Zealand has two settlement systems: Austraclear New Zealand, run by the Reserve Bank, and NZX's FASTER system. NZX announced earlier this year that it intends to launch a new Central Counter Party clearing and settlement system, and plans to seek designation for this system under the new legislation.


At present, New Zealand law only provides for the designation of payment systems, which are used to settle cash. Under the new legislation, the designation regime will be extended to settlement systems more generally.


The legislation also makes minor changes aligning the regulatory environment for exchanges operating in both the securities and futures markets, and supporting the development of the market for emissions units.