Review of NZ Exchange Ltd

News release

1 February 2007

Securities Commission Oversight Review of
New Zealand Exchange Limited

The Securities Commission today released the terms of reference for its oversight review of NZX in respect of the 2006 calendar year. These are published on the Commission’s website, www.sec-com.govt.nz. A copy follows.

The terms of reference are in three main parts. The first section relates to selected areas that the Commission will focus on in depth. These concern (i) the NZAX market; (ii) processes regarding admission or approval of listed issuers and market participants to NZX’s markets; and (iii) NZX’s role in minimising the risk of non-compliance by its listed issuers and market participants.

The second section regards any new developments in relation to the eight core areas of NZX’s activities identified and reported on in last year’s first annual oversight review. The Commission may also consider any issues arising in the course of its review relating to these eight key areas.

The third section reports NZX’s progress towards implementing the recommendations made by the Commission in last year’s report.

The Commission expects to complete its review and publish a report by 30 June 2007.

Securities Commission Oversight Review of
New Zealand Exchange Limited

TERMS OF REFERENCE

The Securities Commission (“the Commission”) is conducting an oversight review of New Zealand Exchange Limited (“NZX”) under sections 10(b), 10(c) and 10(caa) of the Securities Act 1978. The purpose is to review NZX’s performance of its co-regulatory function, in particular its obligations under section 36G of the Securities Markets Act 1988 and, in respect of futures and options dealers, NZX’s regulation of dealers under its Futures and Options Participant Rules.

In particular, in respect of the 2006 calendar year, the Commission will review the following aspects of NZX’s activities:

(a) the management and operation of the NZAX market, including resources, practices and procedures, and the ongoing maintenance of that market;

(b) the processes undertaken by NZX in considering the admission or approval of listed issuers and market participants to its markets, and any particular issues which arise as a result of those processes; and

(c) NZX’s role in minimising the risk of non-compliance by listed issuers and market participants in relation to their obligations under the Listing Rules and Participant Rules;

The Commission’s review will consider any new developments in relation to the following areas:

(a) supervision of market participants and enforcement of the Participant Rules;

(b) supervision of listed issuers and enforcement of the Listing Rules;

(c) allocation of human, technological and financial resources as it affects performance of the regulatory functions of NZX;

(d) internal practices and procedures associated with investigations, price enquiries, complaints-handling and referrals;

(e) discipline practices, procedures and resources;

(f) arrangements for market infrastructure development and maintenance;

(g) Special Division practices, procedures and resources; and

(h) corporate governance arrangements, including board composition, policy setting, crisis response and oversight of executive management, with reference to regulatory standards relating to governance of demutualised exchanges under IOSCO and other international principles.

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The review may also consider any issues arising in the course of the review in relation to the above areas.

The Commission’s review will consider the progress made by NZX (up to the date of the Commission’s report on this oversight review) towards implementing the Commission’s recommendations set out in its report dated 26 September 2006.

AND accordingly, will obtain, consider and utilise information for the purposes of any recommendation, report or comment the Commission may decide to make under sections 10(b), 10(c) or 10(caa) of the Securities Act 1978 in relation to the above matters.

SUBJECT to the Commission’s discretion to amend these Terms of Reference as it may consider fit.

Ends

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