Friday, 21 December 2007

NZX + ASX = OZNZX

The first question people ask me when they find out I trade for a living is "Do you trade NZ shares". I usually answer no, adding that the liquidity in the NZ market just isn't high enough for the kind of trading I do. However, this week we made a NZ trade in an IPO with the idea that it would go up - it didn't - and yes the liquidity was crap.

But the negative trade and liquidity isn't what I'm concerned about (all in a days work after all). But having only ever really invested in NZ shares and not traded them, I wasn't really up on the play about how each trade was actioned. I knew that we couldn't as traders/investors gain direct access to the NZX trading platform like we do in nearly every other market, but I didn't realise that nor do the NZ brokers!

What happens (so I've been told), is that the brokers put their orders into NZX via the phone or some electronic system which just amounts to a glorified email. Then the NZX operators put the orders into the system in the order that they arrive (best bet is to phone NZX and you'll probably get to the top of the queue quicker). Apologies if I've got this wrong - feel free to enlighten me if it's better than this. But whatever it is, it isn't good enough.

Chief Executive Mark Weldon is the great white champion for the NZ stock market, but my god he needs to spend some serious time and money on bringing the system up to world standards if he has got any chance of growing this market. If I had a company to IPO, the last market I would choose would be the NZX - it may be cheaper to list here, but with no market makers and no liquidity your share price just isn't going to be well treated at NZX.

The NZX needs to move into the 21st century and provide a platform that all market participants (not just the brokers) can get direct and fair access to. We don't even have to look far for the worlds best example - the
ASX - which would have to be the most transparent, fair and easy exchange I've ever traded on.

Or here's an even better idea - NZX merge with ASX - OZNZX sounds great! And with all those extra traders and investors in the market it can only be good for New Zealand companies.

1 comment:

Elijah Lineberry said...

Delighted to see you finally found a name for your weblog!

Gosh...it is splendid!

You are quite correct about the NZX, and it is 'Amateur Hour' as far as Stock Markets go.