The Reserve Bank of New Zealand (RBNZ) has already short-listed technology providers to reboot NZClear after scuppering plans to sell its securities settlement business last week.
According to an RBNZ spokesperson, the central bank was “well-advanced” in its search for a systems provider to modernise NZClear, beginning a tender process last year.
The spokesperson said the tender was put on hold during its recent failed bid to sell NZClear but “we already have a list of qualified candidates”.
“We will be investing in a new system,” the RBNZ spokesperson said.
The bank rejected a reported $15 million plus offer from the NZX, which intended to integrate NZClear with its own New Zealand Clearing and Depository platform to create a “single clearing and settlement system”, the stock exchange operator said in a brief statement last week.
“The RBNZ’s decision means the status quo in New Zealand’s clearing and settlement is maintained,” the NZX told Investment News NZ (IN NZ). “The clearing and settlement services that NZX provides are a core part of our business and the capital markets more generally.”
New Zealand equity and debt clearing prices are high by international standards with some market participants hoping a single operator would bring down costs.
It is understood the NZX hived off its 50 per cent share in Link Market Services last year for almost $14 million in anticipation of purchasing NZClear.
While NZClear and the NZX-owned clearing business reported healthy profits in their latest published results (of $2.8 million on close to $7 revenue million, and $2.4 million on gross income of $5.3 million, respectively), both platforms were slated for technology spends.
“NZX is currently investing in upgrading our clearing and settlement system which will enable us to provide even more efficient service to the market, and provide a platform for future growth,” the NZX told IN NZ.
The RBNZ spokesperson said its budget for the NZClear back-end rebuild was “commercially sensitive” given the tender process was ongoing.
Neither RBNZ nor NZX would comment on the reported $15 million offer.
However, the RBNZ spokesperson said the decision to keep NZClear was “not just about price”.
“There were a range of other factors to consider such as service continuity and service delivery,” the spokesperson said. “For example, we had to be 100 per cent sure that service would be operational no matter what.”
As well as the NZX, it is understood the ASX was also originally in the hunt for NZClear.
According to the spokesperson, there were a “handful of interested parties” poking around NZClear.
The RBNZ initially decided to sell NZClear after a 2014 review found:
- that the services currently provided by ESAS [exchange settlement accounting system] and NZClear are likely to be provided in future by new technology that is separated or modular; and
- that securities settlement is not a core business for the Bank, and alternative providers may be able to provide the service and deliver benefits to the financial system.
Despite knocking back the NZClear sale, the RBNZ said it had settled on “a preferred provider for the provision of a real-time gross settlement (RTGS) system to replace the current ESAS system”.
“The Bank will keep ESAS account holders informed about potential key system changes during the system design phase of this project, which is expected to begin in April 2016,” an RBNZ statement says.
The new NZClear platform “will be separate” from the ESAS, the RBNZ release says.