NZ’s second licensed stock exchange due to go live next Monday (June 21) could open up a new liquidity channel for wholesale fund managers, according its chief executive, Colin Magee.
Magee said the Catalist Public Market exchange, while aimed primarily at small-to-medium (SME) corporates, had the capacity to list a range of financial products, including managed funds.
“We’re talking to lots of different issuers from different parts of the market,” he said. “But some structures will require more work than others.”
Wholesale funds could be slightly tweaked to gain eligibility to list on the new retail service, Magee said.
Furthermore, the group’s website says: “Businesses listed on the Catalist Public Market will have the advantage of a number of tax-related benefits, including the ability to set up listed Portfolio Investment Entities (PIE).”
Catalist, which was granted a stock exchange licence by Commerce Minister David Clark last week, has also hired former Kiwi Invest head of wholesale sales, Matthew Laing.
Laing, who has wide experience in the NZ funds industry, finished up at Kiwi Invest at the end of May to take on the new role as Catalist head of issuer relationships.
Under the freshly inked licence, Catalist plans to offer a capital-raising and securities-trading platform for local SMEs initially valued at between $6 million to $60 million. Securities on the exchange can hit a value of $100 million for up to two years before shifting to a larger exchange.
The group has been a limited private market share trading business for a couple of years but the new licence – only the NZX has the same official accreditation – extends the service to public retail investors. Issuers on the new Catalist exchange can raise up to $20 million each year from the public without falling under regulated financial product rules, a statement says.
Issuers, however, must still make adequate disclosures prior to auctions with materials vetted by Catalist.
“SMEs make up a majority of New Zealand businesses, so there’s a real need for those with growth potential to have better access to capital, and equally for investors to have better access to SME investments, to increase economic growth and job creation,” Magee says in the release.
“Catalist’s public market means smaller businesses can now access public investment, with significantly lessened costs and administrative burdens – and without compromising investor protections.”
Unlike the NZX, which has continuous pricing and disclosure, the Catalist exchange has fixed-time auctions with a number of trading rules to provide investor protections as well as options (such as auto-bid and automatic auction extensions similar to the Trade Me system) to ensure a flexible and transparent process.
Magee said the exchange also includes electronic settlement (with no need to issue physical share certificates, for example) as well as an in-house registry service or the ability to connect to external registries like Link or Computershare.
Intended as a “stepping stone” for companies on the way to listing on larger exchanges, Catalist fills the void left by the closure of failed NZX small issuer option – the NZXT – a couple of years ago.
Magee said the NZXT proved too expensive for most SMEs due to its continuous disclosure obligations and other compliance requirements.
The well-established Unlisted exchange also provides an alternative trading option for SMEs with about 20 issuers currently active on the platform. Unlisted operates under an exemption rather than the full stock exchange licence granted to Catalist.
Under the Catalist model, issuers pay a listing fee while the platform also charges a “trading fee of $30 for each successful buy or sell transaction up to $12,000 plus 0.25% for amounts over $12,000”.
Magee, who co-founded Catalist along with chief technology officer Harry O’Connor, was previously head of conduct at the Financial Markets Authority (FMA). As well as Magee, the Catalist board includes: Sovereign and Partners Life co-founder, Richard Coon; ex Jarden head of debt capital markets, David Smith; and, Vanessa Simons, Kiwi Wealth general counsel and former FMA head of corporate legal.