Little AndrewFINANCIAL MARKETS (DERIVATIVES MARGIN AND BENCHMARKING) REFORM AMENDMENT BILLThird ReadingHon ANDREW LITTLE (Minister of Justice) on behalf of the Minister of Commerce and Consumer Affairs: I move That the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Bill be now read a third time. Can I begin by thanking all of the groups who have contributed to making this piece of legislation and getting it to this very important third reading. First and foremost I'd like to thank those in the industry who have worked alongside officials from the Ministry of Business Innovation and Employment and the Reserve Bank in a very consultative way to ensure that we have a piece of legislation that achieves its objectives. This is a complex area of the law and the bill required specialist input from a range of highly qualified people in this sector to get it right. I'd also like to thank the members of the Finance and Expenditure Committee for their hard work in considering the bill. With the select committee period shortened to four months to meet international deadlines there was a lot of detailed work to be done in a short space of time. The result of all that hard work is a very important piece of legislation now in very good shape. As a Government we understand how important it is to maintain strong linkages with international markets. The global financial system is highly interconnected and our banks and other large financial institutions rely on their international linkages to be able to provide vital credit and other services to New Zealanders. The international financial system is also increasingly rules-based and when new rules are introduced New Zealand has to play by those rules in order to continue to participate in the system. This bill helps do those things and brings New Zealand into line with major international reforms to the operation of financial markets. This bill will help New Zealand entities that are looking to raise funds offshore and manage financial risks by making sure they are able to maintain access to key counter-parties and markets. This will directly benefit New Zealand consumers and businesses by reducing borrowing costs and supporting the soundness of our financial system. While there have been jokes in previous speeches about this being a dry piece of legislation I prefer to characterise this as a quiet bill that is actually hugely significant in what it delivers for both our financial sector and everyday New Zealanders. There are some whose response to this bill might be described as actually raving about it and one of those is no less than my colleague Dr Deborah Russell who I think will make a contribution to this bill. I think this House will be enthused by Dr Russell's contribution and I think many New Zealanders will be as well—as indeed they should—because it's such an important piece of legislation. There are two parts to the bill. I hope that members opposite might get excited by the bill too because they have contributed to it through their representation on the Finance and Expenditure Committee as well and I know that for many of them if not raving about it their pulse might be slightly elevated at least when they come to consider it. Part 1 of the bill contains amendments to various Acts that will remove barriers to compliance with new rules for over-the-counter derivatives. The rules require parties to these types of derivatives to exchange what's called margin" and were introduced following the global financial crisis as a way of reducing systemic risk. Compliance with the rules is important for large New Zealand banks and our other large public sector entities like the New Zealand Superannuation Fund and ACC which rely on derivatives for their activities. The bill facilitates compliance with these new margin rules by making various amendments across the statute book.As I mentioned earlier the Finance and Expenditure Committee did an excellent job of scrutinising this piece of legislation particularly to this first part of the bill. The committee recommended a number of important technical amendments. These included changes to the transitional provisions and changes designed to clarify the position when two or more parties have certain types of competing claims to posted margin. During the committee of the whole House stage a number of valuable amendments were also made to the bill. These included amendments to four Acts which while not essential to ensure compliance with foreign margin rules will provide additional reassurance to qualifying derivatives users.In relation to Part 2 this bill also introduces a licensing regime for New Zealand administrators of financial markets. The regime will be monitored and supervised by the Financial Markets Authority. The key objective of this part of the bill is to create a regulatory framework that will achieve equivalence with new EU regulations and enable important benchmarks to be used with EU counterparties. Administrators of New Zealand financial benchmarks who opt in to holding a licence will need to meet the requirements in the bill and further detailed obligations that will be set out in regulations.The bill also provides the Financial Markets Authority with important new powers that are designed to avoid disruption to the market. They do this by ensuring that a financial benchmark can continue to be generated and used on an ongoing basis. These powers would be used only as a last resort in situations where a benchmark administrator is going to stop generating a benchmark or a contributor to a benchmark is going to stop making information available for that benchmark. The powers however are important examples of the types of measures being introduced to make our regime for financial benchmarks more robust. Overall this new licensing regime will reinforce the integrity of the benchmark administration in New Zealand and as with the first part of the bill maintain vital linkages with international financial markets.I'm very happy that we've got to the stage where we've got to a third reading of this bill. I'd like to conclude by reiterating my thanks to the submitters on the bill to the Finance and Expenditure Committee and to officials for all their work on the bill. This bill makes important reforms to New Zealand financial markets which will support New Zealand's integration with global financial markets support the soundness of the financial system and benefit New Zealand consumers and businesses. I commend this bill to the House."