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Bank takes issue on settlement system claims

Reserve Bank Email Service

Date 11 June 2008
Time Immediate

Reserve Bank takes issue on settlement system claims

The Reserve Bank today said it supports the moves to enhance legislation governing the designation of settlement systems, announced yesterday by Commerce Minister Lianne Dalziel.

The Bank took issue, however, with reported views attributed to the NZX regarding the current state of New Zealand's payments and settlements systems as a whole.

"It is not the case that the current system is fragmented, that New Zealand's financial system 'plumbing' is not world class, and that trading of futures is not currently possible," Deputy Governor Grant Spencer said.

"There are two main settlement systems in New Zealand: the Reserve Bank's Austraclear system, and the NZX Faster system. The Austraclear system is used by a variety of institutions including not just banks as reported, but also corporates, trustees and brokers to settle transactions in bonds, shares and cash. In May 2008, the Austraclear system handled average daily trades of $6.7 billion. In the same month, the NZX Faster system for share trading handled average daily trades of $125 million.

"The Reserve Bank has spent $4.8 million over the past two years upgrading its Austraclear system. We have good reason to believe that the Reserve Bank settlement system is world class and it has the support of its users. The upgrade of the NZX Faster system will further improve the overall standard of New Zealand's payments and settlements infrastructure.

"Lastly, New Zealand companies as well as international fund managers and hedge funds have had access to futures trading for over 20 years through futures exchanges operating domestically."

Mr Spencer said the Bank welcomes competition, and the opportunity to contribute to the Government's review of settlement systems.


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