Authorisation of Futures Dealers in New Zealand

Authorisation of Futures Dealers in New Zealand

Proposals for a new regime for futures dealers in New Zealand were announced by New Zealand Exchange Limited (NZX) in September 2003. The Commission welcomed this proposal. Further details were announced today by NZX.

The Securities Commission is the statutory regulator of futures dealers. Under the proposed regime NZX will be the frontline regulator of futures dealers. This structure is in line with the views of the great majority of industry participants who commented on the Commission’s discussion paper on futures dealer regulation.

Under the Securities Markets Act 1988, futures dealers must be authorised by the Commission. Currently, many authorisations require the dealer to be an Introducing or Public Broker of the New Zealand Futures and Options Exchange (NZFOE). However, it is intended that the NZFOE will cease to operate in New Zealand from close of trading on 10 March 2004, and will cease to perform its regulatory functions in New Zealand on 1 May 2004, requiring a change to these authorisations.

The Commission’s policy for authorising futures dealers is based on the general principle that there should be a frontline regulator of futures dealers in New Zealand, in particular those who deal on behalf of retail clients. It is intended that NZX will fill this role.

The NZX will submit its proposed rules for futures dealers to the Commission for approval. Once the rules are approved, the Commission intends to grant a class authorisation for futures dealers who are designated Futures and Options Participants of NZX.

… more … The Commission also intends to grant a class authorisation for futures dealers who are full participants of Sydney Futures Exchange Limited (SFE), covering dealing in products that are regulated by SFE.

Existing authorisations for electricity futures dealers and for some funds managers who deal in futures only as a part of their funds management business, do not depend on the dealers being NZFOE brokers. As we said in our December 2002 discussion paper, we do not intend to review these authorisations at present, although in the longer term changes in the regulatory requirements for futures dealers may affect these dealers.

Other people seeking authorisations to deal in futures contracts, who are not covered by the classes above, will need to apply to the Commission for authorisation.

Futures dealers seeking to become NZX Futures and Options Participants should contact NZX.

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