O'Connor GregGREG O'CONNOR (Labour—Ōhāriu): People often say they stand up to take some great pleasure to speak on these bills but actually I do take some pride in this in that I have been forced to dig deep into my knowledge of financial matters to understand it. I think actually everyone in New Zealand should quite easily understand derivatives because we just go back to what caused the global financial crisis (GFC). We could sit through—and Mr Andrew Bayly gave us a very good technical description of what they are. But quite simply put what you do is you take a whole pile of assets; some of them might be risky some of them might not. The whole idea of creating a derivative is that the whole product should balance out so when one of the products in the derivative is having a bad day a bad week a bad month a bad year the other one will be having a good one. So as Mr Bayly said it's about taking the risk out. However to understand the importance of ensuring that these are well-regulated these derivatives go back to what happened in 2008. These derivatives were made up of houses and the houses were being sold to people who were called NINJAs"—no income no job and I haven't worked out what the other bit was on the "s"; someone might be able to help me there. But essentially it meant that houses were being sold to people at very low interest rates initially who were never ever going to be able to repay the mortgage when the interest rate came to the market rate. So they were fine for two three maybe five years for the time of it. But when the time came to pay them they were never going to be able to pay them. They were always going to be in default.Now the theory was that that was fine because for every bad loan every "NINJA" loan there would be a good loan so these were safe. You could market these things around the United States market them around the world. They were given by the rating agencies—Standard and Poor's and the others—very good ratings triple A ratings. So everyone thought they were buying this nice safe derivative. Well actually what happened was that every single one of the products that made up these derivatives—which could go up for $100 million worth of derivatives—was bad. So when the American housing market collapsed the whole derivative market collapsed. All of a sudden this nice bit of paper this nice derivative that you had—and you thought "Wow this is worth millions maybe billions."—actually wasn't worth the paper it was printed on. So that is why this piece of legislation is very important. It is so that when people do—either directly; or indirectly through their bank through their investment adviser or whatever—enter this highly sophisticated market they have some understanding of what it is that makes up that particular derivative they're investing in. But that's unlikely because we saw following the GFC just how hard it was to unravel these things. I think from memory one person somewhere in New Jersey went to jail at the end of it. No one else was held accountable. The American taxpayer bailed out the banks and the other financial institutions and everyone has gone on wonderfully since. So that brings us to this piece of legislation the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Bill which of course is to bring New Zealand into line internationally so that there can be some comfort that people who are either directly or indirectly investing in the derivatives market will know that that product that they're buying is what it is supposed to be. It is a hedge; it is some sort of bringing together some countering the risk so that ultimately the potential bad stuff should potentially balance the potential good stuff. So when we look at what it is meant to do: it will allow New Zealand entities to meet requirements by making technical amendments to the Reserve Bank of New Zealand Act the Corporations (Investigation and Management) Act the Companies Act and the Personal Property Securities Act.We can only hope—I mean there is nothing certain; we know that just over the weekend with President Trump's on-again off-again trade war with China—that those sort of decisions which may bring amusement to those watching Fox Television or CNN or BBC or even our own television here are just the musings of a man who has become quite an entertainment in the political world. However those decisions come right down to what we are trying to do here today. So I commend this bill to the House."