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NZX under fire for late trading halt on Lyttelton Port shares

An earlier version of this article contained statements by Mr Daniel that implied the timing of the trading halt was delayed as a result of NZX staff being impaired by something they drank at lunchtime. NBR accepts that such statements have no basis in fact and retracts them. NBR unreservedly apologises to NZX, NZX Regulation staff, and Head of Regulation at NZX, Robyn Dey, in particular for any embarrassment the publication of those statements has caused.

Some irate shareholders in Lyttelton Port Company [NZX:LPC] are demanding the NZX cancel trades made before a late trading halt on Friday following a takeover notice.

But the NZX, which clearly missed price-sensitive information, is refusing to action the requests to cancel.

Former Northland Port chairman Mike Daniel is furious after his sell order for a small parcel of LPC shares was initiated when the stock started climbing on Friday afternoon.

That was initially in reaction to a substantial shareholder notice posted at 2.24pm showing a change to Port Otago’s holding in LPC.

The notice described the change resulting from Port Otago entering a lockup agreement with Christchurch City Holdings (CCH).

The agreement was for Port of Otago to sell 15,825,477 ordinary shares in LPC Ltd to CCH pursuant to a full takeover offer to be made by CCH in accordance with the Takeovers Code. CHH will make its takeover at $3.95 a share and also pay a 20c dividend, taking the total payout to existing shareholders to $4.15 a share.

However, NZX failed to flag the announcement as “price-sensitive” and it wasn’t until 2.57pm, some 33 minutes later and after Mr Daniel alerted NZX to the issue, that a trading halt was put in place.

During that time several LPC share trades were matched.

The first went through at 2.26pm at $3.30. At 2.29pm 9400 shares changed hands at $3.59.

“So someone made a nice easy 19c per share on that,” Mr Daniel told NBR ONLINE.

“I happened to be a small seller and I thought 'what’s going on here.' So I rang NZX to try to get hold of Robyn Dey [NZX head of regulation] but they weren’t back from lunch.

“I finally got her and within minutes of talking to her at around 3pm – hello the trading halt comes on.”

Mr Daniel says he made a request for NZX to cancel the trades in the period between the release of the substantial security holder notice and the time at which NZX placed a trading halt on the stock. NBR understands other shareholders also made requests to cancel trades.

So far, those requests have been declined.

Ms Dey then sent an email to Mr Daniel at 5.56pm, saying there had been no error under NZX Participant Rules that would give rise to cancel trades. “For this reason, NZX will not action the requests to cancel.”

The SSH notice was received by email and reviewed before release by NZX accordance with the usual process, the letter noted.

“NZX had not identified that the release contained information that would affect the price of securities.  If NZX had identified that the notice included price sensitive information, then the security would have been placed in trading halt prior to release. 

“NZX uses its best endeavours to identify price sensitive information in announcements and does not guarantee that a trading halt will be put in place prior to release of every announcement received that contains price sensitive information.”

Mr Daniel says that’s not good enough.

"It is their responsibility to decide if something is price sensitive. Clearly it was."

“The resulting trades during the 30 minute period between the posting of the SSH and the posting of the trading halt [at prices from $3.30-$3.80 approximately] were in an uninformed market. Surely it is an NZX responsibility to “gate keep” for investors.

“A practical response from NZX would have been “sorry, we stuffed up, please reverse the trades.

“But no, we have a typical bureaucratic response demonstrating a total lack of understanding of how the market works.

“Now buyers will have received contract notes advising of their fortuitous purchase while the sellers receiving the same advice will rightly feel aggrieved and let down by NZX."

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RAW DATA: Scan showing Lyttelton Port share sales on Friday (PDF)165.18 KB

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Comments and questions
6

And the Govt wonders why little investor ( or the Chinese) won’t give up property. Its still the wild west out there.

That's true. I'll have a lot more confidence in both the NZX and the NZ sharemarket once I've seen a few people in the dock for insider trading, and some decent fines slapped on companies that breach the NZX's rules, including the NZX!

At the moment it does seem like the wild west out there, and who's gaming who!

Can NZX be referred to the NZ Markets Disciplinary Authority. They would cane any party that failed to put in late notice - and now it is time to adhere to their own standard.

don't worry Tumbler, the FMA is always eager to come down on NZX so no doubt will be all over this.

Whilst the NZX should adhere to their own rules this will be decided by the NZ Markets Disciplinary Authority. However what is more concerning is CCH is owned by the Christchurch ratepayer and the council is saying they will have a deficit of over $1bn and they will have to sell assets, here they are buying assets.. Would you call this prudent?

I no longer trade on the NZ market because of this type of adjustable ethics.