Rivals may join forces on market service

NZX, led by Mark Weldon, and the Reserve Bank will look at developing a combined clearing system. Photo / Mark Mitchell

The Capital Market Development Taskforce has asked potential rivals the Reserve Bank and sharemarket operator NZX to discuss whether they can work together on a little known area of New Zealand's financial plumbing.

The RBNZ and NZX announced yesterday they were engaged in "discussions on a potential joint venture to provide clearing and settlement services in New Zealand".

The RBNZ is the operator of New Zealand's Austraclear settlement system which provides back-office functions for the sale and purchase of various securities, primarily bonds, and also payment functions for large-value financial transactions.

However the NZX has been working on a new central counterparty clearing and settlement system to replace its system for the clearing and settlement of equities and other securities on its markets, potentially introducing competition for Austraclear.

NZX says the new system will help it develop new markets for financial derivatives including dairy and other commodity futures.

Having developed a registry for carbon credits, NZX also appears to have an eye on opportunities arising from the government's emissions trading system when it eventuates.

It is understood the impetus for the discussions comes from the Capital Markets Development Taskforce.

The taskforce, whose members include NZX chief executive Mark Weldon, has asked the two parties to investigate possible "synergies" between their systems.

Likely sticking points include technological compatibility and the fact the RBNZ only needs sufficient revenue from Austraclear to cover its costs while the NZX will seek a return on its investment.

The initial discussions are expected to run for about two months.