Arguments for and against the NZSE merger

Arguments for a merger

* A merger is an inevitable part of the trend towards global trading of securities, and will create a strong regional exchange. The New Zealand market will be marginalised if it remains alone as exchanges around the world merge. Remaining alone as exchanges around the world merge will see the New Zealand market marginalised.

* New Zealand companies will be showcased more effectively to international investors on a bigger, more enterprising and much more influential exchange.

* A merger will result in a lower cost of capital for larger companies listed on the ASX.

* The identity of New Zealand companies will be protected by separate umbrella identification on the ASX.

* Some of our bigger companies have threatened to move their formal listing to the ASX if the merger does not go ahead.

* Greater protection for investors on the ASX will be extended to New Zealand investors.

Arguments against a merger


* Further globalisation of trading in securities will happen whether or not the NZSE merges with the ASX, or any other exchange.

* The ASX may be big compared with the NZSE, but it is still tiny in world terms and not much of a bigger blip on the radar screen of globalinvestors.

* Foreign investors are losing interest in New Zealand companies not because our exchange is small but because corporate performance has been poor. This will not change with listing on a new market.

* A company's cost of capital is largely a function of the risk/reward tradeoff of its operations, not where it is listed.

* A merger will inevitably see market monitoring and enforcement functions move to Australia, with New Zealand authorities losing governance of local companies.

* Medium-sized and smaller New Zealand companies will receive even less coverage from research brokers and the financial media, making it harder for local investors to make informed decisions.

* The loss of some of New Zealand's brightest financial talent - sharebrokers, corporate finance advisers, lawyers and accountants - will accelerate as the investment community's focus switches across the Tasman. Companies seeking capital will follow and move their head offices.