New Zealand sharemarket operator NZX is defending the release of the makeup of its NZX50 index to a subscriber service rather than to all investors at the same time.The issue blew up last week when NZX changed its mind about including Allied Farmers Ltd i
New Zealand sharemarket operator NZX is defending the release of the makeup of its NZX50 index to a subscriber service rather than to all investors at the same time.
The issue blew up last week when NZX changed its mind about including Allied Farmers Ltd in the NZX50 index. The company said its share price rose after a memo was sent by NZX to subscribers of its Market Indexation Memorandum Service advising of Allied Farmers inclusion in the index. Its shares fell on notification on Friday that it would not be included.
The memo goes to data vendors, fund managers and market participants, including Bloomberg, Thomson Reuters and Iress.
Both the New Zealand Shareholders' Association and Allied Farmers regard the information as material and price sensitive and would prefer it to be released to all investors at the same time.
Association chairman Bruce Sheppard said the case had put the issue of price sensitive information being sold in sharp relief and he had written the NZX chairman Andrew Harmos about it and other matters.
The matter exposed the conflict between NZX being a commercial company and a market regulator and the conflict in its regulation of itself.
Mr Sheppard said he could see no reason why the market could trust NZX with regulation for a moment longer.
NZX said today that the monthly index memo was distributed to a wide group and the distribution of index-related information via these channels was a common global practice.
"Index information does not originate from the issuer. As such it falls into the category of broader market-related information that is factored into investment decisions and or recommendations."
There were many factors which were external to an issuer that may be of interest to investors in stocks, such as research reports, credit ratings and the like.
Allied Farmers' chief executive Rob Alloway said information which was material to security should not be included in a subscriber service unless it was also distributed publicly.
"As a market operator you can't sell that stuff," he said.
The Government is investigating the idea of merging the Companies Office, Securities Commission, and the NZX Disciplinary Tribunal into a new market conduct regulator because the existing agencies failed to protect investors from finance companies collapses. The idea was suggested by the Capital Market Development Taskforce.
Mr Sheppard is also querying NZX on the time it took to announce a provision relating to its previously sold carbon registry business.
