Setbacks delay clearing house

Photo / Richard Robinson

The launch of NZX's clearing and settlements systems, which the sharemarket operator hopes will underpin an ambitious set of new financial derivatives including milk powder futures, appears to have been delayed.

Sources at broking firms said NZX last week told a meeting of participants that the system, due to go live on July 26, was delayed for five to six weeks.

An NZX spokeswoman was unable to confirm that yesterday and said NZX had "nothing substantive" to say.

A broking industry source said NZX had attributed the latest delay to minor technical issues concerning system testing and finalising regulatory matters. The delay was "frustrating" for his firm given the level of effort and investment required of participants to meet NZX's previous deadlines, he said.

The clearing house project would see NZX act as a central counterparty in trades between brokers, removing the risk of non-payment by one of the parties involved in the transaction.

However the project suffered speed wobbles early last year when a letter from the Securities Industry Association to NZX setting out brokers' concerns about the cost of the the new system and NZX's failure to gain an industry consensus were leaked.

Some brokers have now chosen not to participate and they will execute their trades through bigger firms which do.

The settlement system will provide back-office functions for the sale and purchase of various securities, primarily bonds, and also payment functions for large-value financial transactions in competition with the existing Austraclear system operated by the Reserve Bank.

The systems will underpin NZX's ambitions to launch a series of derivatives products this year including electricity derivatives and milk powder futures. Stock options and index futures were planned for next year.