Recent research indicates that the local stock exchange has become a safer environment for investors, thanks to the implementation of stringent regulations. The Financial Markets Authority (FMA) recently released a market cleanliness report, which evaluates insider trading trends on the NZX over the last two decades.
While the year-to-year data can fluctuate, the long-term view reveals a steady decline in incidents of market abuse. Chief economist Stuart Johnson attributed this positive trend primarily to global efforts aimed at eliminating trading leaks, alongside successful local regulatory measures.
Johnson noted that the most significant drop in suspicious trading activities occurred after the Financial Markets Conduct Act was enacted in 2013. He explained that since then, abnormal trading patterns have notably decreased. The NZ RegCo, which regulates the NZX, utilizes a sophisticated software tool known as Smart to monitor individual trades and detect any irregularities effectively.
Moreover, various broker-dealers and banks contribute to market oversight by reporting concerning behaviors, which collectively helps maintain market integrity on a broader scale. Johnson expressed that this report should reassure both investors and businesses regarding the reliability of the share market.
He emphasized that Kiwi investors need to have confidence that their investments on the NZX are situated in a clean market, free from large-scale manipulation. Similarly, New Zealand companies seeking to raise capital should find comfort in the safety of the NZX as an appealing platform for listing and attracting investments.
The FMA plans to continue evaluating market cleanliness at least every couple of years, ensuring ongoing vigilance in protecting market integrity.
This article showcases the positive developments in ensuring a fair trading environment, highlighting the effectiveness of regulations in building investor confidence and fostering a more stable economic landscape in New Zealand.
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