Dated at Wellington this 15th day of June 2010.
The Common Seal of the Takeovers Panel was affixed in the presence of:
Colin G Giffney,
Statement of reasons
This notice applies to acts or omissions occurring on or after 15 June 2010 and expires on 15 June 2015.
NZX Limited is proposing to establish a new clearing house.
The clearing house will be operated by a subsidiary of NZX Limited, New Zealand Clearing Limited (NZ Clearing). Settlement will occur in a depository that will be operated by another subsidiary of NZX Limited, New Zealand Depository Limited (NZ Depository).
The clearing house’s clearing and settlement system (CSS) is to be the platform through which trades on NZX Limited’s markets are settled. The depository is the central product depository. The depository enables (among other things) electronic custody, delivery, recording, and settlement of interests in products, including securities, traded through the CSS.
A broad range of products, including securities with voting rights in code companies, will be cleared and settled through the CSS and held in the depository.
The process by which voting securities are cleared and settled may result in persons who are entitled to undertake clearing and settlement and associated depository activities under the relevant rules of the CSS (the clearing participants), and NZ Clearing and NZ Depository, temporarily becoming the holders or controllers of voting rights in code companies.
Exemptions for NZ Clearing, NZ Depository, New Zealand Clearing and Depository Corporation Limited, and NZX Limited
Clauses 5 and 6 of the notice exempt NZ Clearing and NZ Depository and their upstream controllers, New Zealand Clearing and Depository Corporation Limited and NZX Limited, from rule 6(1) of the Takeovers Code (the Code) in respect of any increase in their respective voting control in a code company as a result of the exercise by NZ Clearing or NZ Depository of any power or the performance by NZ Clearing or NZ Depository of any function under the rules of the CSS, or otherwise as a consequence of any event or circumstance affecting NZ Clearing or NZ Depository in their respective capacities as operators under the rules of the CSS.
The Takeovers Panel (the Panel) considers that the exemptions for NZ Clearing, NZ Depository, and their upstream parties are appropriate and consistent with the objectives of the Code because—
the exemptions apply only in the course of NZ Clearing and NZ Depository’s clearing and settlement and depository functions; and
the holding or control of voting rights by NZ Clearing and NZ Depository would be incidental to, or in connection with, carrying out their clearing and settlement and depository roles and is necessary to ensure a robust clearing and settlement system; and
the Code will apply to the holding and control of voting rights by beneficial owners, and by CSS participants, acting in their own right; and
the exemptions maintain a proper relationship between the cost of compliance with the Code and the benefits arising from it.
Exemption for clearing participants and upstream parties
Clause 8 of the notice exempts clearing participants and upstream parties of those clearing participants from rule 6(1) of the Code in respect of any increase in their voting control in code companies as a result of the holding or controlling of voting rights as part of the clearing and settlement of a transaction through the CSS.
Clearing participants, either in their own right or together with associates, may hold or control more than 20% of the voting securities in a public issuer when carrying out the clearing and settlement of a transaction through the CSS.
It would not be practical for clearing participants to carry out clearing and settlement transactions if it were first necessary for them to comply with (or obtain specific exemptions from) the Code. Without this exemption, rule 6(1) of the Code would effectively preclude clearing participants from carrying out clearing and settlement transactions.
The Panel considers that the exemption for clearing participants and their upstream parties is appropriate and consistent with the objectives of the Code because the conditions of exemption ensure that the policy of the Code is complied with by requiring that the voting rights are controlled by the beneficial owner of the voting securities.
Exemption for associates
Clause 10 of the notice exempts associates of any of the persons exempted under clause 5, 6, or 8 (principal exempted persons).
The Panel considers that the exemption for associates of the principal exempted persons is appropriate and consistent with the objectives of the Code because it is consequential to the exemptions in clauses 5, 6, and 8 of the notice and applies only to the extent that the principal exempted persons have the benefit of those exemptions.