Market operators

Operating financial product markets requires licencing, irrespective of whether such are retail or wholesale financial product markets. An explanation of what is a financial product market is provided in s309 of the Financial Markets Conduct Act (FMC Act). 

Anyone operating a financial product market in New Zealand needs to be licenced unless an exemption applies. Further information on exemptions can be found in the next section.  

Under s310 of the FMC Act, anyone operating a financial product market in New Zealand needs to be licenced unless an exemption applies. There are a number of ways an operator may be exempt from licensing as follows: 

1. the market satisfies either of the following criteria (FMC Act s312(1)(a)):
   1. the number of relevant transactions on the market does not exceed 100 transactions; or 
   2. the aggregate value of the financial products acquired under the relevant transactions on the market is less than $2 million 
2. the market is a prescribed wholesale market (FMC Act s312(1)(b))
3. the market is a prescribed exempt market (FMC Act s312(1)(c)
4. an individual exemption (FMC Act s556) 

Exemptions under options 2,3 and 4 must be applied for.

Prescribed exemptions – wholesale or exempt markets 

Pursuant to section 545(1)(m) of the FMC Act, the Governor-General may, by Order in Council, on the recommendation of the Minister in accordance with section 549 (i.e., following consultation with the FMA) make regulations exempting wholesale markets or other financial product markets from licensing of financial product market. 

The procedural requirements (and relevant considerations) the Minister must undertake for regulations relating to exemptions are set out in section 550 of the FMC Act. 

We recommend any operator seeking an exemption under one of these routes to engage early with MBIE and the FMA. 

Exempt entities currently under this category are displayed below. 

Prescribed exempt markets: 

• Unlisted Market

Prescribed wholesale markets: 

• There are currently no prescribed wholesale markets. 

Individual exemptions

There are individual exemption options under section 556, which can in limited circumstances, include an exemption from the obligation to be licensed to operate a financial product market. Individual exemptions have a 5-year maximum term and an application fee applies.  

Further detail on individual exemptions can be found here on the FMA’s website.  

Exemptions

To date, a number of exemptions have been given with regards to financial product market licensing which can be found here. 

FMC Act exemptions

The Minister of Commerce and Consumer Affairs issues financial product market licences, with advice from the FMA. In accordance with s316 of the FMC Act, the Minister and the FMA must consider the following before issuing a licence to a financial product market operator:

• the nature of the activities proposed 
• the market’s proposed size
• the nature of the financial products dealt with
• the likely participants (either directly or by using the services of participants);
• the proposed market rules and internal policies and procedures of the proposed operator; and
• the technology used in operating the market.

The Minister must also be satisfied that an applicant will be able to meet the general obligations of licensed market operators, found in s314 of the FMC Act, and is a body corporate registered on the FSPR.

In circumstances where an applicant is already authorised to operate a financial product market in an overseas jurisdiction in which its principal place of business is located, section 317 of the FMC Act specifies the criteria as to which the Minister must be satisfied before issuing a license to operate the same market in New Zealand.

How to apply

To ensure your application runs as smoothly as possible, make sure you understand what is required:

1. Register with the Companies Office on the Financial Service Providers Register (FSPR).
2. A person who wants a licence to operate a financial product market should apply to the FMA in writing. We will assess your application and ensure you have provided all relevant information, before giving the Minister advice about the application, which we must do within a reasonable time. The information included should be fulsome and clearly demonstrate and include:
   • How the proposed market will meet all of the general obligations set out in s314 of the FMC Act.
   • The proposed rules for the market. It also needs a description of any consultation that has been carried out about the rules (public or targeted); details of any relevant international best practice; and evidence that the rules meet what’s required under s328 of the FMC Act. For more information on the approval of market rules, you can download s327 to 336 of the FMC Act.
   • How you have the skills, expertise, procedures and capacity to satisfy each of the obligations on a continuing basis.
   • How you will comply with s316 of the Act, including that you are a body corporate and have registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
3. A person who wants to apply for a licence for an overseas regulated-market, should provide information on how it will meet the criteria specified in the section 317 of the FMC Act.
4. A market operator must not operate markets that are not specified in a licence, but a licence may cover more than one financial product market. The standard conditions for a licence include:
   
   • The financial product market covered by the licence.
   • The clearing and settlement arrangements for the market.
   • The arrangements for enforcing the rules of the market.
5. The Minister may also place other conditions on the licence. The market operator can subsequently request changes to the conditions of its licence, or the Minister may vary the conditions on his or her own initiative. Any request for changes by an operator should also be made to the FMA in writing.

On receipt of an application for a licence the FMA will review all information provided and may request further information from the applicant. The FMA must, within a reasonable time, give the application to the Minister with advice about the application. Processing time depends upon the complexities within the licence and the quality of information provided by the applicant.

Market rules and changes

Licensed markets must be operated under market rules that comply with the FMC Act as noted previously noted. A market rule, or change to a market rule, for a licensed market has no effect until it has been approved under section 331 of the Act. Following issuance of a licence (which includes initial approval of the market rules), market operators must obtain approval for any proposed market rule changes by providing an application in writing to the FMA in accordance with section 330 of the FMC Act.

On receipt of an application the approval period is 40 working days unless extended by the FMA.

For markets licensed under section 317 (overseas-regulated markets, the FMA does not approve the market rules, but the market operator must provide the FMA with the notice of market rule changes (section 334 of the FMC Act).

The application fee for a licence to operate a financial product market, vary an existing licence, or approve a market rule change is based on the amount of time spent on the application. This is charged at the FMA hourly rate.

For more information see the Financial Markets Conduct (Fees) Regulations 2014.

The Financial Markets Authority (Levies) Regulations 2012 (the Levy Regulations), as amended in 2020, set out the levies payable by industry. The levies are set by the Ministry of Business, Innovation, and Employment (MBIE).

The FMA receives funding from the Crown and a proportion of our costs is recouped from industry through levies.

Levy Classes

A financial markets participant falls within one or more levy ’class’, depending on what financial services they provide.

• A levy must be paid for every levy class the financial markets participant falls within. Levies are payable on the relevant leviable event as described in column 3 of Schedule 2 in the Levy Regulations.
• Most notably for market operators, Schedule 2 confirms:
  • levies for market operators licensed under section 316 are split in to two types: those operating 1 or more conventional market(s) and those operating 1 or more growth market(s) fall within levy class 10.
  • operators of overseas-regulated markets fall within levy class 7.

• The following levy classes are invoiced directly by the FMA: Levy Class 8, Levy Class 8A, Levy Class 10, Levy Class 10A and Levy Class 13.

If the market operators provide any other financial services in New Zealand, they will need to also consider the applicable class and levies payable for those services. You should be familiar with levies and Schedule 2 of the Levy Regulations. 

Levy waivers

We have discretionary power to waive a levy (in whole or part).

We will only do so if we are satisfied that the circumstances or characteristics of the financial markets participant are exceptional when compared with the circumstances or characteristics of others in the same class, so that it would make it inequitable for the person to pay the levy. The threshold is deliberately high.

The waiver power is not intended to be used to revisit settled policy positions.

Once we receive a waiver application and the fee, we will assess it.  If we decide to grant the waiver, we must notify our decision in the Gazette, and publish the decision and reasons for it on our website.

How to apply for a levy to be waived

You will need to email the following information to [email protected] with the subject line ‘Levy waiver application’.

• Name of person or entity applying for the waiver.
• Contact person for correspondence concerning the application including address, phone number and email.
• Indicate the persons/entity who will receive the benefit of any waiver granted.
• Specify which class(es) you seek a waiver from and whether a waiver is sought from the full levy or part and the amount thereof.
• Let us know your preferred date for any waiver to take effect.
• Explain why the waiver should be granted and why your circumstances are exceptional when compared with others in the same class.
• Provide all relevant facts in support of your application.
• Explain any regulatory benefit of FMA granting the waiver.
• Give details of any previous contact with officials (including their names) at FMA or MBIE (including the Companies Office) on the matter.

How to pay your waiver application fee

You can pay by electronic deposit or internet banking. Payment can be made by applicants or law firms making applications on behalf of their clients.

The person paying the application fee must be the person who pays the subsequent fees and costs. For example, if a law firm pays the application fee, that law firm must also pay any additional fees and costs.

We recommend if law firms apply for waivers on behalf of their clients, the parties discuss and agree who will be responsible for paying the FMA’s fees before submitting a waiver application.

* This is the name of the person paying the application fee. This person will be invoiced for any subsequent fees and costs. Payment by credit card is not available for this application process.

What are the fees

• A payment of $1,265 should accompany each application.
• This covers the application fee of $115 set out in the Financial Markets Authority (Fees) Regulations 2011 and an advance of $1,150 (including GST) for fees and costs to be incurred.
• These regulations set out charging rates of $230 (including GST) per hour for time spent by FMA Board members and $178.25 (including GST) per hour for time spent by FMA staff.
• These regulations are set by MBIE.

General obligations of licensed market operators

As a market operator, you must make sure your licensed markets operate in a fair, orderly and transparent way (s314), and have arrangements in place for the following:

• handling conflicts between your commercial interests and fair, orderly and transparent markets
• making market disclosures available
• monitoring conduct on the markets
• enforcing your market rules.

You must also ensure you have the resources required to operate your markets properly, and you are able to continue to meet any conditions of your licence.

Regulatory reporting

• As a market operator you are required to provide the FMA with a periodic self-assessment on how well you have complied with your obligations during that period (s337). This is due within 3 months after the end of your reporting period.
• The FMA must carry out periodic reviews of your compliance and publish our findings in a report. If we find that you are not meeting your general obligations, we can ask you to put an action plan in place.
• As a market operator you are obliged to notify us of certain events, such as when you take disciplinary action for breaches of your market rules, or when you suspect someone may have breached the legislation. You must also give us information and assistance when we need them to carry out our regulatory role.

Download subpart 8 of part 5 of the Act to understand full details of your ongoing operational obligations

It is the responsibility of each financial service provider to ensure they are registered for the service(s) they provide and have paid the appropriate levies.

Under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (the FSP Act) it is an offence to:

• provide services you are not registered for or state you are registered for a particular financial service when you are not
• make a representation relating to any document or information required by the FSP Act or its regulations knowing that it is false or misleading, or omit any matter knowing such omission is false or misleading.

These offences could result in a fine of up to $100,000 and/or imprisonment for individuals, and a fine of up to $300,000 for businesses.

It is also an offence under the FSP Act to fail to notify the Registrar if any of the details contained on the FSPR are no longer correct. Failure to notify could result in a fine of up to $10,000.

View the NZX notices and Market Operator notices archive.