About NZX Clearing

History

In 2007, NZX undertook a review of the clearing and settlement arrangements operated through the FASTER settlement system. This review was conducted in light of the recommendations of BIS / IOSCO on securities settlement systems and NZX's strategy to introduce new products into New Zealand's markets, such as commodities, derivatives, and emissions units. Settlement of these products was not possible using the FASTER system.

In response to this review, NZX determined that in order to better meet global standards for equities and fixed income securities settlement, a central counterparty (CCP) clearing, and settlement system would be required. This would allow NZX to address inadequacies in the current system, as well as offering a more suitable platform for the launch of a series of innovative products it sought to bring to market. The CCP would be complemented by a central securities depository (Depository) which would be used for the custody and transfer of products settled in the CCP.

Since its launch in 2010, NZX Clearing has managed the post-trade risk management, and clearing and settlement operations for all on-market cash and derivative trades. The fully operational Depository has complemented the CCP, with the provision to its Participants of services including an OTC DVP Model 1 settlement system, a stock lending and borrowing facility, and custody services.

In March 2016 NZCDC began settling cash market trades on a T+2 settlement basis. This completed a 6-month project which engaged numerous external stakeholders including Participants, independent software vendors and the ASX. Shortening of the settlement cycle on NZX's cash markets ensures NZX Clearing matches international best practice in this area, and specifically maintains alignment across New Zealand and Australia's capital markets, as well as the broader Asia-Pacific region.

NZX Clearing Structure

The NZCDC Settlement System, shown below, comprises of a central counterparty clearing house operated by New Zealand Clearing Limited (NZC) and a central securities depository operated by New Zealand Depository Limited (NZD). New Zealand Depository Nominee Limited (NZDN) is the holder of legal title to securities held in the securities depository.

The settlement system is designated under the Financial Markets Infrastructure Act 2021

Governance

The NZCDC Board governs the overall operations of the clearing house and the depository.

The NZX Board is responsible for the overall governance of the NZCDC Group. The NZX Board is assisted by the NZX Clearing Committee in fulfilling its governance responsibilities to ensure NZX Clearing continues to have adequate resources, to meet its obligations as the central counterparty.

Board and Clearing Committee

The NZCDC Board is appointed by the NZX Board and comprises members of NZX's Management team. The members of NZCDC Board are Mark Peterson, Graham Law, Roger Bayly and Felicity Gibson. More information on the Clearing Committee can be found here