Bayly AndrewANDREW BAYLY (National—Port Waikato): It's a pleasure to be talking on the Financial Market Infrastructures Bill. I just want to acknowledge the Minister of Finance for nearly doing six minutes on the Financial Market Infrastructures Bill. I thought he did a great job of trying to understand the plumbing of the financial infrastructure of New Zealand. That was obviously well rehearsed and well written by his advisers so I do compliment him.Before I talk about this bill and get into the details of it hopefully for not too long I thought it would be just useful for people to understand what this bill is about. Unfortunately when you read the commentary it doesn't actually talk about what we're dealing with and essentially what we're dealing with is the issue of derivatives and how financial markets work. So we have things like people wanting to borrow money from a bank and they want to borrow it in Australian dollars and they want to borrow it on a fixed interest rate. However they mightn't be able to do that directly so what they do is they use different types of instruments to do it. They could use a derivative that deals with the transfers the fixed interest rate to a variable floating rate or they might use foreign currency. It's quite common to swap one currency for another. So you can use different types of derivatives to actually make change.What this bill is about—and I can see my learned colleague here beside me—Hon Michael Woodhouse: I'm hanging on every word.ANDREW BAYLY: —hanging on every word OK. So what this bill is about is there are two types of trades that go on in the market and the first one is the exchange trade. Probably the best analogy of that or example of that is actually if you were to buy shares on the market through the New Zealand Stock Exchange that is an exchange traded transaction. What this is about or what the second element is about is principally around over the counter. That means it doesn't go through an established jurisdiction or an established organisation. In fact the Reserve Bank operates two of them. It has what's called the Exchange Settlement Account System payment system and it has NZClear which is another trading system. What the International Monetary Fund was concerned about was actually back in about 2006 and more recently in 2016 the fact that we had a relatively unregulated over-the-counter market in New Zealand. So what they strongly advocated was that we should be tightening up the arrangements around that and of course this has now led to this bill. Of course it was initiated by the National Government and obviously carried on under the current Government and of course today we're at the second reading. It's taken a long time to get to this point.But it is important because there's substantial trades every day on these different exchanges in over-the-counter. We're talking about billions of dollars' worth of derivatives essentially traded every day. So what this bill is about is putting in place better rules and regulations as to how that trading can take place. As I think the Minister just spoke about before it is complicated and there are different entities involved. I think the biggest thing is this all came about through the GFC because as many of you will recall a lot of the financial meltdown if I can use that word actually was sourced back to the trading of derivatives. People had not quantified their liabilities sufficiently and when the crunch came many organisations found that they were insolvent because they were literally overwhelmed by the outstanding liabilities they had around their derivatives trading. And there are many investment banks that were caught in that situation. So that was the prime driver for it. We've obviously been through the COVID crisis over the last year and it is heartening to see that in the main the New Zealand market's held up pretty well. Although what was offsetting about that and actually contributing to supporting the market was many of the traders were actually permitted to go to work. But this shows that there is robustness to the New Zealand situation but many people were very worried about derivatives because they are basically a synthetic or arbitrary created instrument.So this bill looks at enhancing some of the rules and regulations around it. The Minister sort of highlighted the key causes around it or aspects of it but basically the one is to allow the Reserve Bank—and in the Financial Markets Authority there is a combined role but the Reserve Bank is the principal—to be able to set standards around the issues around how financial market infrastructures or derivatives are set. The legal standards behind them clarify the ownership structure and all those different aspects. So there's more clarity around what instruments we're dealing with. It also enables the regulator to monitor what's going on much more closely so we don't get into a situation like the GFC and for the regulator to have an oversight of what's going on in the market.These are all good things. Obviously this is a highly technical bill. Luckily we had some people from the Reserve Bank that helped us through the process. We are supporting this bill across the House which is good. It's one of those rare moments when we all come together for the common good of New Zealand. I think that's probably enough because we're going to go into committee of the whole House and I am just waiting for the contribution from the Hon Gerry Brownlee because I know he is an expert in this matter and I'm sure he'll be able to illuminate a lot more to my colleagues across the way some of them of course who are new to the committee and may be struggling with the concepts. But I know my learned friend here will be ready to pick up any points if they don't actually understand all the detailed aspects of this bill. Thank you very much Madam Speaker.