Reserve Bank rebuffs NZX claims

The normally reticent Reserve Bank dealt a sharply worded serve to the stock exchange yesterday over claims about the state of the country's payments and settlement systems and futures markets.

RB deputy governor Grant Spencer said the bank took issue with views attributed to NZX regarding the current state of the payments and settlements systems.

"It is not the case that the current system is fragmented, that New Zealand's financial system `plumbing' is not world class, and that trading of futures is not currently possible," he said.

The potshot follows an article in The Dominion Post yesterday headlined "NZX to milk futures" in which exchange chief executive Mark Weldon was quoted saying New Zealand markets would be much broader and deeper in a few years allowing trading in commodities such as milk, energy, and other "futures".

Changes to the legal regime for clearing and settlement systems would make New Zealand a more attractive place to invest, Commerce Minister Lianne Dalziel said.

Mr Weldon said the existing system was fragmented and outdated. NZX's Faster system was becoming obsolete.

He was quoted as saying New Zealand was too small for two systems.

There are two main settlement systems in New Zealand: the Reserve Bank's Austraclear system and the NZX's Faster system.

Austraclear is used by a variety of institutions not just banks as reported, but also corporates, trustees and brokers, to settle transactions in bonds, shares and cash, Mr Spencer said.

Last month, it handled average daily trades of $6.7 billion against Faster handling average daily trades of $125 million.

He noted the RB had spent $4.8m over two years upgrading Austraclear.

"We have good reason to believe that the Reserve Bank settlement system is world class and it has the support of its users. "Lastly, New Zealand companies as well as international fund managers and hedge funds have had access to futures trading for over 20 years through futures exchanges operating domestically."

- NZPA