Exchange gives rule changes

Press, 15 February 1989, Page 40

Exchange gives rule changes

By

PATTRICK SMELLIE

in Wellington

Major membership and trading rule changes were announced yesterday by the New Zealand Stock Exchange. The changes include a move which will make mergers between New Zealand and international broking houses easier. While the president of the Stock Exchange, Mr Robert Wilson, said the new decisions were not prompted by the sharemarket crash, there were new rules to make brokers more personally liable for firms’ defaults.

The major decisions announced were:

• Entry to exchange membership will no longer be by election, but through a standing committee. The executive director of the exchange, Mr Roger Gill, said this recognised criticism that the exchange was “clubbish” and that the election system was outmoded.

• The 50 per cent limitation on non-member ownership of corporate members has been abolished.

This follows the Australian trend, and will allow investment in broking firms by overseas firms, or larger local firms.

Mr Wilson welcomed this prospect, saying New Zealand brokers would gain a stronger foothold in international markets as a result. The move also allowed greater investment in the sophisticated services required by modern securities firms.

• Substantial and specific financial obligations have been imposed on members associated with any defaulting firm who wish to remain members or resume practice.

Mr Gill said this would effectively place the same unlimited liability provisions on a member of the exchange operating as an employee of a member firm as a member operating as a partner or individual broker.

• The exchange’s policy and decisionmaking structure has been streamlined, making a two-tier structure into a single 10-member board of directors. • Establishment standards for new sharebroking

firms and so practitioners will be strengthened. • Exchange floor trading rules will be standardised.

• Exchange trading floors will trade bn all days other than statutory holidays. • A further $500,000 will be levied from members for the exchange fidelity fund. Mr Wilson said options were being explored for increasing cover for the exchange, possibly through insurance, although recent market conditions made this more difficult. Mr Gill said the changes, along with others already announced, dealt with the bulk of the criticisms levelled at the exchange by the Commerce Commission last year.

Mr Wilson was reelected president at yesterday’s meeting of the Stock Exchange executive, and Mr Kevin O’Connor, of Dunedin, was reelected vice-president. A new class of honorary membership is also being established to recognise the contributions of retired members of the exchange.