Allan KiritapuKIRITAPU ALLAN (Labour): It's a delight to be able to make a contribution to this discussion this evening on the Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Bill. Now I'm not sure if this was a common practice across the House but what I did to get myself familiar with derivatives and their origins—I did what all millennials do and I turned to Netflix and in particular the movie The Big Short.Dr Duncan Webb: Oh it's awesome.KIRITAPU ALLAN: It's a fantastic movie but I mean basically if anything can be said about the global financial crisis (GFC) and its origins it does come back to the way that trading began to be operated on this faux—well it's not faux. Now it's an important monetary asset and policy—but around the origins of derivatives and their role that they play in a modern economy. Now in 2008 we saw what happened when you had effectively an unregulated market where the most common example of a derivative then was a mortgage-backed security. The lack of regulation around these derivatives and these types of loans we saw had the impact of mortgages falling 31 or so percent. I think it drove us into the worst financial time of our generation—well in my particular lifetime but since the Great Depression.So in response to the GFC in 2008 many people knocked heads to work out how they could bring more security to this particular area of finance. It's been brought to the attention of this House from a number of contributors this evening the role that the G20 have played and the determinations that they have made. Now we aren't one of those G20 nations but we are indeed very much interrelated and our trade is very much interrelated and our economic positioning in the globe is very much interrelated on those trading relationships with those nations in the G20.As well Madam Speaker you'll be very familiar—this House is very familiar with the determinations that the EU have made to bring regulation to the way that their derivatives and their markets operate. Now those rules they come to a head or they will be enforced in the EU from the start of next year. So this piece of legislation under the stewardship of Minister Faafoi introduced into this House in February went through a relatively robust and technical process in terms of ensuring that this piece of legislation was fit for purpose for our domestic response. Whilst we weren't inundated with submissions we were as one of my colleagues rightfully said prior privy to some very technical well-thought-through and indeed very useful submissions—13 in total and I must commend the levels of expertise from those that presented before the Finance and Expenditure Committee.Now the bill that is before us this evening for this reading does come to this House with a number of amendments and they are amendments that we have heard and I sincerely hope that the submitters feel we have adequately responded to those submissions that we heard. In particular there was some consternation amongst the submitters around the transition times in the provisions of the bill and in particular at what point—when you break the bill up—Part 1 would come into effect and how that would come into effect.So one of the amendments that we have made is to ensure that Part 1 applies to derivatives entered into before the bill comes into force as well as after. Now this amendment was essentially necessary just to address the practical issues that related to derivatives users and how they managed and exchanged the collateral required by those G20 rules. Another amendment that has been brought through into this bill—we've proposed the amendment to require collateral to be in the possession or the control of the enforcing party before they can actually enforce their rights to the collateral or obtain those special protections I guess you could say. This change essentially will avoid confusion that may arise if there are overlapping claims to that same collateral or by other third party creditors.Another amendment that we proposed in response to some of the submissions that we received is essentially a whole range of relatively small but technical amendments that when read in the totality I think will probably give our submitters—and indeed the financial sector that rely on trading upon these derivatives—the security that they require.In addition this bill also establishes a licensing regime for the administrators of other financial benchmarks under the Financial Markets Conduct Act. Now this has been introduced of course in response to the new regulations that have been developed by the EU and I spoke about how those are coming into force relatively soon. Now these regulations do have an effect outside of the EU and upon us effectively as a foreign jurisdiction that wants to trade. So the benchmark administrators in those jurisdictions must meet a whole range of particular requirements in their new regulations in order for the benchmarks that they administer to be used as an important financial instrument with the parties that are located in the EU.We heard from a range of large banks and large private and public sector organisations all of which rely on entering into various derivative instruments with EU counterparties and of course G20 counterparties. I think it's been widely canvassed in this House just how significant those derivatives are for hedging investments capital-raising purposes and the like.So I mean there have been a few laughs this evening about the fact that this is a relatively dry piece of legislation or it lacks in flair. I refer to the comments of my colleague Willow-Jean Prime from Northland. She mentioned that the Hon Judith Collins made the papers for her comments around how lacking in interest this type of legislation is. But it isn't. This is sexy legislation—there you go I'll go on Hansard and say that—you know for the wellbeing of our ability to trade with our larger counterparties the EU and the likes. We saw the harm that can occur when the derivative market remains unregulated. Whilst it's a little late in the piece—probably about 11 or so years on—New Zealand's doing our part to make sure that the derivative market we rely on does have safe benchmarks in place. I commend this bill to the House.