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NZFOX Share options contracts - Declaration as a futures contract in terms of the Securities Markets Act 1988 [2005] NZSecCom 5 (29 April 2005)
Last Updated: 10 November 2014
NZFOX SHARE OPTIONS CONTRACTS - DECLARATION AS A FUTURES
CONTRACT IN TERMS OF THE
SECURITIES MARKETS ACT 1988.
29 April 2005
- New
Zealand Exchange Limited ("NZX") has asked the Commission to declare NZFOX share
options to be "futures contracts" for the purposes
of New Zealand law. The
Commission seeks comments on this proposal.
- The
NZFOX share options will be options to buy or sell New Zealand equity securities
listed on NZX's markets. The NZFOX share options
are created and marketed in New
Zealand by NZX but will trade on the Sydney Futures Exchange ("SFE"), an
authorised futures exchange
under New Zealand law. The terms and contract
specifications for the NZFOX share options are available from the SFE website at
http://www.sfe.com.au, in section
6c (commencing on page 197).
- The
NZFOX share options will be third party options created independently of the
issuer of the listed securities. They are able to
be settled otherwise than by
delivery. As these share options are synthetic in nature and created
independently of the issuer of
the listed securities, the disclosure
requirements (about the issuer of the listed securities) in terms of the
Securities Act 1978
do not appear to provide the best regulatory solution for
these products.
- The
NZFOX share options appear to have most of the characteristics of a "futures
contract". However, there is some doubt as to whether
they fall entirely within
the definition of a "futures contract" in the Securities Markets Act 1988. To
provide certainty in the
market NZX has sought a declaration that NZFOX share
options be declared to be "futures contracts' in terms of the Securities Markets
At 1988.
- In
1990 the Commission had made a similar declaration in respect of equity options
over New Zealand Stock Exchange Limited shares
traded on the New Zealand Futures
and Options Exchange and offered in accordance with the by-laws of the New
Zealand Futures and
Options Exchange.
- The
declaration sought by NZX would provide certainty about the regulatory treatment
of these options and the regulatory obligations
of dealers in the options.
- In
New Zealand all futures dealers must be authorised by the Commission. It is the
Commission's preference that dealers in NZXFOX
share options become NZX Futures
and Options Participants under the NZX Futures and Options Rules.
- The
Commission has granted a class authorisation for NZX Futures and Options
Participants. This means that if the declaration is granted
any person approved
by NZX as a Futures and Options Participant will be authorised at law to deal in
NZFOX share options.
- As
the declaration is likely to affect some of the business community who are
likely to deal in such NZFOX share options, we are inviting
comments to assist
the Commission to consider the application for the declaration sought.
- Should
you wish to comment on the matter may we please receive your comments by 5 p.m.
Friday, 20 May 2005. Your comments may be sent
by email to narmada.patel@seccom.govt.nz or sent in
hard copy to -
Narmada Patel
Senior Solicitor
Securities Commission
Level 8, Unisys House
P O Box 1179
WELLINGTON
Facsimile: (04)
472 8076
- Please
note that any submissions received by the Commission will be subject to the
Official Information Act 1982. Any request for
submissions will be considered
under that Act. Please advise if you have any objection to publication of your
submission.
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URL: http://www.nzlii.org/nz/other/NZSecCom/2005/5.html