NZX is pleased to announce it has reached an agreement in principle with First NZ Capital to become the foundation market maker for NXT, NZX’s new market designed for small high growth businesses.
The market maker role will include:
• Displaying bid and offer quotes for a guaranteed number of shares
• Displaying bid and offer quotes for a minimum number of trading hours
• Maintaining a pre-arranged spread between the bid and offer quotes
In order for NXT to be successful, there needs to be a sufficient level of liquidity to aid price discovery, and encourage investor confidence in NXT listed companies. In a liquid market, investors can buy and sell shares easily, and there is enough trading activity for the daily market price to accurately reflect the value of the underlying business.
Market markers are often recognised for improving market quality in general, reducing the size of bid/offer spreads and improving market depth and liquidity. Designated market makers are a feature of many overseas markets.
The intended appointment of First NZ Capital as designated NXT market maker follows NZX’s announcement in December regarding Edison Investment Research’s appointment to the role of default NXT research provider. The key functions of these two appointments are to promote liquidity, encourage companies listed on NXT to be fairly valued, and to improve the frequency and quality of information available to all investors.
James Lee, First NZ Capital’s Managing Director-Head of Securities commented: “NXT is an exciting new development in New Zealand’s capital markets, and we are proud to extend our market making of existing instruments to incorporate the role of foundation market maker for NXT.”
NZX Head of Markets, Aaron Jenkins commented “The intention to appoint First NZ Capital, one of New Zealand's leading finance houses as the designated NXT market maker is the final, critical element prior to the trading launch for NXT. We have been very pleased with the level of interest from companies who are considering NXT listing, which further reinforces NXT’s importance in supporting the aspirations and growth of New Zealand’s small to medium sized business sector.”
First NZ Capital’s appointment and market making arrangements remains subject to formal approval by NZX Regulation, and review by the Financial Markets Authority.
Key features of the market
• A market aimed at small to mid-sized businesses with an expected market cap of $10-100 million
• Reduced costs and complexity, both during the listing process and ongoing
• More support for companies listed on the market
• A streamlined regulatory environment, with a set of simpler, template-based rules and procedures
• The presence of market making and research to aid liquidity
• Better information on companies for investors through quarterly updates, research coverage and key operating milestones