RECOGNITION OF THE NEW ZEALAND FUTURES AND OPTIONS EXCHANGE LIMITED

Recognition of a further Overseas Investment Exchange in the UK boosts London's status as a leading international financial centre for investment, Economic Secretary Melanie Johnson said today.

Miss Johnson was announcing Treasury recognition of the New Zealand Futures and Options Exchange Ltd (NZFOE), which has met the criteria laid down under sections 37 and 40 of the Financial Services Act 1986. Miss Johnson said:

"I am pleased that NZFOE have satisfied the criteria in the Financial Services Act and look forward to their operations here in the UK.

UK markets and investors can now directly trade on the Exchange in New Zealand using screens based in London. The advantages include wider choice and greater convenience, enhancing the scope of the London market for the benefit of the industry's participants, and demonstrating that it is both a competitive and efficient place in which to do investment business."

NOTES FOR EDITORS

1. Recognition as an overseas investment exchange under sections 37 and 40 of the Financial Services Act 1986 enables the exchange to carry out investment business in the UK.

2. Recognition of the New Zealand Futures and Options Exchange Ltd (NZFOE) as an additional overseas investment exchange will promote greater efficiency and innovation to the benefit of all, including consumers and the UK financial services industry. Recognition should provide UK investors with greater choice and lower transactions costs, and should provide the marketplace with greater liquidity and depth.

3. Other currently UK-recognised overseas investment exchanges are:

NASDAQ

Sydney Futures Exchange

Chicago Mercantile Exchange

Chicago Board of Trade

New York Mercantile Exchange

Swiss Exchange

Cantor Financial Futures Exchange

Eurex Zurich

Warenterminborse Hannover (Hannover Commodity Exchange)

4. Criteria for the recognition of overseas exchanges outside the EU are laid down in sections 40 and 119 of the Financial Services Act 1986. The main criteria are:

that the exchange is subject to supervision in its home country, which, together with its own rules and practices, affords UK investors protection at least as good as that provided by UK regulatory arrangements relating to UK exchanges;
the exchange is able and willing to cooperate by sharing information and otherwise with the UK authorities, and adequate arrangements for such cooperation exist between the relevant national authorities;
- that none of the rules, guidance and clearing arrangements have significantly anti-competitive effects, or if they do, that these effects are no greater than is necessary to protect investors. The Office of Fair Trading advises HM Treasury on this point.

5. NZFOE applied for recognition on 16 February 1999. The Treasury has been in external discussions concerning their application since then. The report from the Office of Fair Trading was received on 16 November.

6. Overseas exchanges are regulated primarily by their home state regulatory authorities. NZFOE is regulated by the New Zealand Securities Commission. Regulatory authorities have confirmed that they are willing and able to exchange regulatory information.

7. UK investors are protected by scrutiny against a range of criteria under the Financial Services Act. To be recognised, exchanges must, amongst others:

have financial resources sufficient for the proper performance of its functions
have rules and practices which ensure that business is conducted in an orderly manner
limit dealings to investments where there is an orderly market
have clearing arrangements which guarantee transactions in the event of default
have adequate arrangements and resources to ensure compliance with its rules.

8. EU investment exchanges (except commodity exchanges) do not need formal recognition to carry out investment business in the UK under the terms of the EU Investment Services Directive.

Press Notices 2000 January to June index