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OPPORTUNITIES (5) REVIEW REGULATORY FUNCTIONS ■

We recognise that self-regulation has its benefits, including an overall increase in regulatory resources and an ability to leverage inside knowledge/expertise of industry professionals.

However, we suggest there exists significant benefits toward adopting a government/statutory model similar to that in Australia. Such a centralised approach promotes efficiency and reduces the duplication/layering of regulation, including supporting infrastructure and oversight activities.

We further suggest that the FMA would be better positioned to deliver more effective regulation as a single agency, as it would have broad jurisdiction overall market participants; avoiding conflicts of interest between NZX’s commercial functions as a “for-profit” entity, and their position as a regulator - we point to the significant costs associated with regulatory functions while disciplining your own customers counteracts relationship building activities essential to all businesses.

We suggest that transferring more regulatory responsibilities to the FMA would rebalance NZX’s competitive position relative to the ASX, which currently has a cost advantage due to their adoption of a government/ statutory model in 2010.

MEDIA RELEASE 8 July 2010

ASX and ASIC sign supervisory transfer arrangements ASX Limited (ASX) and the Australian Securities and Investments Commission (ASIC) have reached formal agreement on the transfer of responsibility for the supervision of trading on ASX’s licensed financial markets. The transfer will take place on Sunday, 1 August 2010.

New Zealand is well suited to this model due to the small size of its market – traditionally, one of the major headwinds for large complex markets wanting to adopt centralised regulatory models has been the overwhelming resource required to do so; this is simply not the case for NZX. Finally, in the FMA’s - NZX Annual Obligations Review (1 January - 31 December 2017) the FMA specifically highlighted a lack of expertise in the market surveillance function. This would seem an obvious place to start to us*. 238

Upon the transfer: •

ASIC will assume responsibility for the supervision of domestic licensed financial markets and for participants (including the relationship between participants and their clients) on those markets;

ASX will retain responsibility for ensuring participants admitted to its market comply with its operating rules; and

23 ASX staff will take up positions at ASIC in conjunction with the transfer of responsibility.

The new arrangements do not change the existing oversight of listed entities or the obligations on ASX’s clearing and settlement facility operators. The Australian Government announced the changes to the supervision of Australia’s financial markets in August 2009 as the first step towards considering competition between market operators. ASX is retaining a subsidiary company to fulfil the obligations of each of the licensed entities in the ASX Group to monitor and enforce compliance with the ASX operating rules after the transfer. •

The name of this subsidiary will change to ASX Compliance, as the existing name - ASX Markets Supervision - will no longer properly describe the subsidiary’s role within the ASX Group or ASX’s ongoing obligations.

Kevin Lewis has been appointed to the role of Group Executive and Chief Compliance Officer. He starts on 19 July and his role supersedes the Group Executive role that Eric Mayne has held in his five years with ASX.

Alan Cameron AM, a former chairman of ASIC, will remain chairman of the ASX Compliance subsidiary. As is presently the case, only one director on the board of ASX Compliance will also be a director of ASX.

Media inquiries: Matthew Gibbs Manager, Corporate Relations (BH) +61 2 9227 0218 (Mobile) 0411 121219 matthew.gibbs@asx.com.au www.asx.com.au/media

* https://fma.govt.nz/assets/Reports/_versions/11034/NZX-Obligations-Review-2018.1.pdf

Leeanne Bland Corporate Relations Executive (BH) +61 2 9227 0410 leeanne.bland@asx.com.au www.asx.com.au

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