Statement from the joint regulators of the NZClear system


Joint statement from the FMA and Reserve Bank of New Zealand
2 June 2015

NZClear is a designated settlement system and consequently subject to Part 5C of the Reserve Bank of New Zealand Act 1989 (‘RBNZ Act’). As joint regulators of this designated settlement system, the Financial Markets Authority (FMA) and the Reserve Bank’s Prudential Supervision Department have issued this statement in order to clarify policy expectations concerning any prospective changes to the ownership and operation of the NZClear securities settlement system (‘NZClear system’).


In 2014, the Reserve Bank undertook a strategic review of the two payment and settlement systems that it owns and operates, namely ESAS, the interbank real time gross settlement (RTGS) system and NZClear, a securities settlement system.   Following a consultation process with industry, the Reserve Bank’s Financial Services Group (FSG) commenced a project to identify replacement technology and business solutions for these two systems.  As part of this project, FSG issued documents in December 2014 seeking Registrations of Interest (ROI) from potential vendors for the procurement of new settlement systems to replace the current ESAS and NZClear systems.  The other key aspect of the work underway is to assess the viability of potential alternative providers of securities settlement services.

More information on the payment systems replacement project is available at:

The NZClear system is a systemically important financial market infrastructure that plays a key role in New Zealand financial markets. The system is used to settle fixed interest and equity transactions and cash transfers. In addition, the depository at the heart of the NZClear system is the record of ownership of a substantial proportion of NZD denominated securities.

Given the importance to the New Zealand financial system of the markets for which settlement currently occurs in NZClear and the fact that it is a designated settlement system, the joint regulators consider it important to clarify regulatory expectations in respect of the future provision of securities settlement services.


Guided by Part 5C of the RBNZ Act, any change in ownership or operation of the NZClear system, or its replacement by another system, should be consistent with the following objectives:

  • Promoting the maintenance of a sound and efficient financial system,
  • Avoiding significant damage to the financial system that could result from the failure of a participant in a settlement system,
  • Promoting the integrity and effectiveness of settlement systems and related markets in New Zealand, and
  • Enhancing the confidence of investors and other market participants in settlement systems and related markets in New Zealand.

In considering changes to the ownership or operation of the NZClear system, or its replacement by another system, the joint regulators expect the following outcomes:

1. Regardless of the ownership structure and operating model, the system used to settle transactions currently settled in the NZClear system will be able to consistently demonstrate a high degree of observance with the CPMI/IOSCO Principles for Financial Market Infrastructures (PFMI). 


2. Settlement will continue to occur in a designated settlement system that abides by the policy document, “The Designation and Oversight of Designated Settlement systems” (DSS1).


3. The joint regulators will have adequate regulatory influence over the system, particularly so in the event of distress. In order to achieve this outcome, the system in its entirety will be located and operated within New Zealand. This requirement does not, however, preclude offshore ownership.

4. Settlement risk will not be re-introduced into the New Zealand fixed interest securities market. This would be achieved if the system continues to provide delivery versus payment settlement on a transaction by transaction basis (Model 1 DVP).