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New Zealand to modernise derivatives law
06 September 2010
New Zealand’s Ministry for Economic Development has proposed introducing a new financial regulatory act to replace the outdated Securities Act 1978 and Securities Markets Act 1988, and amend other laws.
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New Zealand
Ministry for Economic Development
regulation
The proposed new bill would distinguish between four categories of financial products: equity, debt, collective investment schemes and derivatives.
A futures or options contract would be defined as one meeting these criteria:
- “Changes value in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract (ie. the underlying)”.
- A derivative would also require no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors.
- Finally, the contract is settled at a future date.
The ministry said it was aware that this definition would exclude contracts demanding a 100% margin and asked for feedback on this.
The ministry said it would also like to distinguish between OTC and exchange-traded contracts.