Shanks Katrina: Settlement Systems Futures and Emissions Units Bill — Second Reading 
Shanks Katrina: Settlement Systems Futures and Emissions Units Bill — Second Reading 
[Volume:658;Page:7604] 
KATRINA SHANKS (National) 
: 
 It is my pleasure to take a call and speak in favour of the Settlement Systems Futures and Emissions Units Bill this evening. This bill was first brought into Parliament in September last year by Lianne Dalziel who was then the Minister of Commerce. The current Minister of Commerce the Hon Simon Power is now in charge of it for its second reading and its Committee of the whole House stage. 
This bill addresses three areas. The first is to do with settlement systems. The Reserve Bank of New Zealand Act 1989 is amended to provide for the designation of systems that clear and settle products not just payments. The second area is futures. The Securities Markets Act 1988 is amended to align the regulatory environment for exchanges seeking to operate in both securities and futures markets and to provide that market participants approved by an authorised futures exchange are deemed to be authorised to deal in future contracts. The third area is emissions units. The Securities Act 1978 the Securities Markets Act 1988 and the Personal Property Securities Act 1999 are amended in order to clarify the legal treatment of emissions units. 
This bill had some quite complex issues attached to it so I take this opportunity to thank the officials. They gave us some fantastic advice and kept on simplifying these complex issues so that we understood them properly and understood the impact that this legislation will have on the sector. I also thank the submitters who made some very complex detailed submissions to the Commerce Committee. I acknowledge the NZX for its submission; it was very detailed and very informative for the committee. Our officials used that submission a lot when we were formulating decisions as to what changes we would make to this bill before it was brought back to the House. So I take this opportunity to thank officials for their work. 
In 2007 the New Zealand Exchange requested that the Government urgently provide legislation to support an upgrade of its existing clearing and settlement system and the expansion of its exchange-traded products to include futures and emissions units. In response Cabinet approved the introduction of this bill which we saw at the end of last year. A robust market mechanism is necessary to facilitate improved risk management and functioning of New Zealand’s capital markets to develop the products that exist in the market including preserving the ability for businesses and to develop carbon and other derivatives and over-the-counter markets that offer a regulated and authorised clearance of settlements function. If we are serious about getting our economy going we must be serious about the capital markets as well. 
I would like to talk particularly to the emissions units part of the bill. The bill clarifies the regulatory treatment of emissions units to support the development of the market for emission units. This applies both to units issued as part of a statutory scheme such as the Kyoto Protocol and to units issued in the voluntary market. It gives effect to this policy through technical amendments to existing legislation. For example the bill clarifies that the emissions units are to be treated like other forms of property in the Securities Act 1978. As a result trading in emissions units will not need to meet the requirements of the regulatory regime for offers of securities or the relevant provisions of the Securities Markets Act unless they are part of an investment scheme. The bill also amends the Personal Property Securities Act 1999 to enable persons to take possession of and security interests over both statutory and voluntary emissions units. 
The select committee made some recommendations in relation to the definition of “emissions units”. It recommended that clauses 27 33 and 36—covering the definition of “emissions units” to be inserted into the Securities Act the Securities Markets Act and the Personal Properties Act—be amended to include units in accordance with any enactment of a jurisdiction within another country or any international treaty or protocol. That is very important. These clauses should also be amended to include the storage of greenhouse gases in the definition. The carbon market is still quite new so the definition of “emissions units” should be broadened to allow for the evolution of this market and the changes that we will see in the future. This might involve technological developments in the way carbon is managed and stored and developments in the sources of carbon credits. Regarding sources for example the committee noted that “increasingly carbon credits are being issued by state or local governments under international treaties and protocols and through legal or contractual arrangements in addition to being issued by central governments.” The definition specified in the bill needs to be wide enough to cover all potential sources of credits so that this bill stays relevant for a period of time. 
The bill is designed to align New Zealand’s clearing and settlement system with international best practice and to facilitate trading in futures and emissions units. It provides that trades in securities and other products can be cleared and settled through designated systems that meet the expectations of international and domestic participants in New Zealand’s financial sector. It aligns the regulatory environment for exchanges seeking to operate in both securities and futures markets and provides that market participants in approved and authorised futures exchange are deemed to be authorised to deal in all these future contracts. This bill clarifies the regulatory treatment of the emissions units to support the development of the market for emissions units. That is just one part of the changes that we made in this bill. I will leave my colleagues to expand on the other two parts. It is my pleasure to support this bill tonight. Thank you.