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Brief Counsel

NZX consults on assessment of price sensitive information

21 August 2015

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​The NZX is reviewing its practice of seeking to identify whether information may be price sensitive before flagging it to the market and calling an administrative trading halt.

It has put out a consultation paper requesting feedback on four alternative approaches.

Submissions close on 25 September.

We discuss the options on offer.

The review is welcome because the current practice is not satisfactory.  It puts a big responsibility on the NZX to review a large volume of information and to determine its significance in real time.   
This is not about NZX trying to reduce its workload, but rather recognising that the limitations inherent in the process can make it potentially misleading.
The options are:
  1. to cease entirely the whole business of trying to flag to the market price sensitive information and applying an Administrative Trading Halt (ATH)
  2. to continue the practice but to make these assessments based on a prescribed list of announcements (e.g. financial results, changes to key personnel or material transactions)
  3. to continue the practice but require issuers to determine price sensitivity, or
  4. a combination of two and three.

Chapman Tripp comments

Option Three shifts the burden to the issuer, without really addressing the problem. Even issuers find it hard to identify price sensitivity in advance – with the result that they are likely to be overly conservative and “red P” more than they have to, creating unnecessary noise and confusion in the market. 
Price sensitive information can also originate from third parties – as in substantial product holder and takeover notices.
In practice, to avoid uncertainty, issuers already ensure that results announcements and transactions are finalised and released outside trading hours.  The Commerce Commission does the same with market sensitive statements. 
We favour Options One or Two.  If Option Two is preferred, items that will give rise to an ATH should be limited to periodic disclosures (results announcements, where there is a large volume of information to digest).  Any other categories should only be recognised if disclosure practices can be standardised.
The usual issue arises of coordination with the ASX which, we understand, is considering a similar change in policy on ATHs.  Clearly, it would be better if the two exchanges had a common approach.  We would encourage this if possible.
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