The notice exempts specified participants from the substantial product holder requirements in sections 276 to 279 of the Financial Markets Conduct Act 2013 (the Act) in respect of certain relevant interests in financial products that are the result of participation in the NZCDC settlement system.

This notice continues the exemption granted by the Financial Markets Conduct (NZCDC Settlement System) Exemption Notice 2014, which is revoked at the close of 30 November 2019. This notice comes into force on 1 December 2019 and is revoked at the close of 30 November 2024.

The Financial Markets Authority (the FMA), after satisfying itself as to the matters set out in section 557 of the Act, considers it appropriate to grant the exemption because—

• the relevant interests in financial products to which the exemption applies arise as a result of holding and transferring relevant interests through the usual operation of NZX Limited’s markets and the NZCDC settlement system; and

• granting the exemption is necessary in order to promote and facilitate the development of fair, efficient, and transparent financial markets, because the clearing and settlement of trades on the NZCDC settlement system by relevant participants and the related holding of financial products and the lodgement of financial products in the depository in connection with settlement are a necessary corollary of trading activities on NZX Limited’s markets; and

• given the nature of the interests that may arise, and the extent to which interests may arise, by virtue of the operation of the NZCDC settlement system, and given the parties that may hold interests, compliance with the Act in full may inhibit an informed market. Specified participants have legal title to these financial products only for the purposes of participating in the settlement system and do not have the beneficial interests attaching to those products. Further, the holdings will constantly change, and to require disclosure would distract from the market being aware of genuine relevant interests; and

• the exemption is consistent with the policy of the Act, which excludes certain interests in financial products from the definition of relevant interest, thereby limiting the scope of the circumstances in which substantial holdings in financial products must be disclosed to where the disclosure is useful; and

• further, given there is no benefit to requiring disclosure in the circumstances covered by the exemption, to do so would create an unnecessary compliance cost; and

• the exemption will not adversely affect listed issuers and, by facilitating trading in financial products in listed issuers, will provide benefits to investors. By limiting the scope of the exemption to the specified participants, the extent of the exemption is not broader than is reasonably necessary to address the matters that gave rise to the exemption.