NZX calls for rules on Unlisted

Something that looks looks like a dog and barks like a dog is probably a dog, says the New Zealand Exchange about rival stock trading platform Unlisted.

"The Unlisted market is clearly acting in the capacity of an unregistered exchange. It has all the characteristics of an exchange, except for proper and appropriate regulation," NZX says in a submission to the Commerce Minister on the unregistered exchange.

"To put it baldly, Unlisted looks like a dog and barks like a dog. However, it would have investors, and the Government, believe that it is another type of animal entirely."

NZX is supporting Government moves to apply the Securities Act to internet-based stock trading company Unlisted - meaning it must comply with the same regulations NZX does to continue operating.

The Government believes the market has become too big, especially since firms such as Skyline Enterprises, owner of the Queenstown gondola and worth more than $200 million, are using the facility.

Unlisted manager Bruce Cossill has previously said the company would contest calls for it to become a registered exchange. He said in December that Unlisted constitutes only a small part of the trading mechanism it represents.

"While the interests of buying and selling of the securities is publicised on Unlisted, the trading and settlement of trades occurs between brokers," Cossill said.

Unlisted trades 21 companies and competes with NZX's alternative exchange market, NZAX.

The NZX submission used the recent example of Unlisted welcoming Hedge Fund Patrol onto its listing board, only to retract it a day later citing concerns over the legalities of information provided and the requirements of the Securities Act.

"Clearly Unlisted is portraying itself as being compliant with regulations that exert no real authority over it and, in doing so, it has created the perception among investors that its suggested compliance [and therefore their protection] is actual, rather than merely apparent," NZX said.