Recent research indicates that the local stock exchange is becoming a more secure environment due to the implementation of stringent regulations. The Financial Markets Authority (FMA) released a report analyzing market cleanliness, which assesses the incidence of insider trading on the New Zealand Exchange (NZX) over the last two decades.
While there may be fluctuations in yearly data, a broader analysis reveals a decline in instances of market abuse over time. Chief economist Stuart Johnson attributes this improvement to both global efforts to eliminate information leaks and effective local regulatory measures.
Johnson pointed out that significant progress was evident after the Financial Markets Conduct Act was enacted in 2013, citing a clear reduction in abnormal trading patterns following its introduction. The NZ RegCo, responsible for the regulation of the NZX, utilizes advanced software known as Smart to scrutinize individual trades, enabling them to detect any anomalies effectively. Additionally, feedback from brokers and banks helps maintain a stable and clean market.
This report serves as an encouraging signal for investors and businesses alike. Johnson emphasized that New Zealand investors can be confident that their investments in the NZX are safeguarded against major manipulations. Furthermore, businesses seeking to raise capital can be reassured that the NZX operates as a secure trading platform, making it an attractive option for investment.
The FMA plans to continue monitoring market cleanliness, conducting assessments every year or two.
This positive trend suggests a growing confidence in the integrity of the NZX, ultimately supporting more robust investor participation and business growth. Investors can feel optimistic that a safer market leads to better investment opportunities and a more stable economic environment.
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