NZX confirms changes to pricing structure

NZX Limited
Level 1, NZX Centre
11 Cable Street
PO Box 2959
Wellington 6140
New Zealand
Tel +64 4 472 7599

www.nzx.com

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8 August 2018

NZX confirms changes to trading and clearing pricing structure

NZX confirms it will implement changes to its trading and clearing pricing structure on 1 October
2018. Targeted policy changes and technology improvements will be introduced alongside
pricing changes.

Driving secondary market development, further improving liquidity levels and enhancing price
transparency were some of the most important initiatives outlined in the exchange’s refreshed
strategy in November 2017.

These changes follow a successful trial of a new pricing structure in the secondary market over
the past 12 months, which has helped contribute to an additional 33% in on-market value traded
since August 2017. At the beginning of 2017 on-market activity was 39.8%, it is now 53.3%.
This compares to 23% on-market value traded ten years ago, and 28.8% five years ago.

NZX anticipates that on-market liquidity will continue to grow at the same rate.

Trading and clearing pricing changes

The new pricing structure will remove the current $1.31 per trade fixed fee and move to a fully
variable or value based fee structure. This pricing structure now aligns with broker business
models and will enable them to price for their services with more certainty. The new trading and
clearing pricing schedule can be accessed here.

Targeted policy changes

NZX released a consultation paper in April 2018 to review targeted areas of its secondary
market rule settings to support the pricing and technology changes. NZX received six formal
submissions along with extensive written and verbal feedback from brokers, the New Zealand
Shareholders’ Association, institutional investors, Transparency International New Zealand, and
the Financial Markets Authority. These changes are designed to address this feedback.

The outcome of the review was that NZX will introduce a minimum crossing size for trading on
its Main Board and NZAX markets, initially set at $50,000. Off market crossings may be
conducted below this level provided they result in “price improvement” for both sides of the
trade. The minimum crossing size will be reviewed regularly to ensure it remains fit for purpose
as NZX’s markets develop further. Changes will also require that at least one side of a crossing
relates to a single party.

Subject to approval from the Financial Markets Authority, NZX aims to introduce the rule
changes on 1 October 2018 to align with pricing and technology changes. NZX will confirm
timing for the rule changes in due course.

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Technology changes

Pricing and targeted policy changes are supported by additional functionality which will be
added to the trading system, X-Stream. This responds to feedback from the market to introduce
pre-negotiated deal functionality to allow pricing of trades to four decimal places. These
changes will enable dealers to facilitate midpoint crossings below the minimum crossing
threshold and report off-market trades with increased precision (e.g. VWAP trades).

NZX Head of Markets Development and Clearing Benjamin Phillips commented: “Driving
secondary market development was a key pillar of our refreshed strategy, and momentum
created over the past 18 months demonstrates that the market is aligned on its direction.”

“Collectively, today’s changes will enhance price transparency, facilitate growth in liquidity, and
continue to advance New Zealand’s secondary market.”

For further information please contact:
Hannah Lynch
Head of Communications
T: 09 308 3710
M: 021 252 8990
E: hannah.lynch@nzx.com