seeking feedback around its assessment of price sensitive information is not just an attempt to reduce its own workload, Chapman Tripp
partner Josh Blackmore says.
The stock exchange 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 (ATH) and put has out a consultation paper requesting feedback on four alternative approaches.
The options include to cease entirely the whole business of trying to flag to the market price sensitive information and applying an ATH; to continue the practice but to make these assessments based on a prescribed list of announcements (such as financial results, changes to key personnel or material transactions); to continue the practice but require issuers to determine price sensitivity; or a combination of two and three.
“There’s been a bit of commentary in the market that it’s a way for NZX
to manage its own administrative workload; and I think, having had conversations with both clients and the NZX
, we would reject that,” Blackmore told NZLawyer
“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 review is welcome because the current practice is not satisfactory, he said.
“It puts a big responsibility on the NZX
to review a large volume of information and to determine its significance in real time.
“In reality, NZX
can only really ever get this wrong. It’s very difficult to assess price sensitivity in a very short period of time, before the information is released to the market. Issuers themselves struggle to do that and so do advisors.”
Accordingly, the risks for NZX
are always going to be to the downside, Blackmore said.
“There is a real issue around tagging some announcements and not others for price sensitivity risks actually misleading the market, which is clearly not a space in which NZX
wants to be in.”
favoured options one or two, which NZX
have signalled are their preferred outcomes, he said.
“You could see a world in which NZX
decided that certain announcements – particularly when there’s a lot of information to digest, and I’m thinking here about half year and full year results announcements, where there’s actually a lot of information being published at the same time to the market – should actually have an ATH applied, on the basis that it is worthwhile giving the market a short period to digest that, rather than having to make spot judgements and having to place orders within a couple of minutes of being released.”
Blackmore believed it was a good time to do the review.
“It’s a source of minor annoyance rather than fundamental frustration for issuers, but from the issuers that we’ve talked to who are clients, everyone’s broadly supportive of taking a look at this practice and probably supportive of ending the whole business of trying to flag price sensitivity to the market all together.”
It would also be great if NZX
and ASX could align their approaches on this, he said.
“Increasingly, a lot of our clients in particular, are dual-listed on both ASX and NZX
, so we have been advocating for some time for as much alignment as possible between the exchanges on how they approach things like this.”