Ann: ADDRESS: NZX: Chairman's & CEO's Add

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NZX
03/05/2013 11:01
ADDRESS

REL: 1101 HRS NZX Limited

ADDRESS: NZX: Chairman's & CEO's Addresses

NZX Annual Meeting 2013
Chairman's Address

As my letter in the annual report says - 2012 was another full and active
year - and a critical year to get right with our CEO change and board renewal
process.

Chris Moller and Therese Walsh would probably appreciate the analogy -
business can seem like a one day cricket innings - to get a winning score
requires consistency, minimisation of low scoring periods, maintenance of
momentum with bouts of high scoring.

Changes of batsmen often lead to a loss of momentum and a period of low
scoring - and in the corporate world - ensuring a seamless CEO change and
managing the associated risk of a loss of momentum, with an appropriate plan,
are key governance imperatives.

NZX has achieved that and credit for it goes to our new CEO and our
hardworking and dedicated management team. Warren Buffett's annual
shareholder letters are generally full of praise for the efforts of his group
of CEO's - a quality CEO and management team makes a board's job that much
easier. I thank Tim, the management team and the wider organisation for that.

So with Tim having nearly completed a year in the role, the management team
now largely in place and, subject to your support at the next stage of this
meeting, our board composition set, I thought this was a timely opportunity
to articulate in a broad way our vision for the business.

New Zealand has a regional and global edge in the primary sector, and we see
NZX as well placed to enjoy global relevance in the financial market
offerings that are key to participants in the New Zealand and Australian
rural sectors and the global dairy sector, wherever in the world they are
based. Our dairy derivative, rural information and Australian grain trading
platform represent the tools - both risk mitigation for farmers & others and
trading for financial market participants in those sectors - with which we
are looking to achieve growth. They are our established platforms from which
we will build out further offerings. Building scale - liquidity and volume -
in those businesses, having the most relevant and informative data, and first
class infrastructure remain the key priorities.

The on-going success of Fonterra's global trading platform and the integrity
of its operation and data are key to attracting more global participants into
our dairy derivative products. Our relationships across the rural sector,
the information we have and gather through those relationships and our reach,
are strategically very important to NZX. So we aim to have a strong regional
and global presence in those areas where New Zealand and NZX in particular
has an edge.

Domestically, we are, to a degree, a vertically integrated provider of
products and services to participants in the financial and capital markets.
By vertically integrated, I mean that we have our own product offerings in
the form of our Smartshares products - obviously a very small but valuable
part of the product universe for investors - through to offering the listing
and trading infrastructure for debt, equities and other products, data
products for information which that trading produces, a share registry
function and then "post trade" settlement and clearing with our wholly-owned
clearing house.

There is ample scope to expand our suite of offerings and gain market share
in our established ones. We are working on that with equity derivative
products, our relationships in the energy sector, and to help ease access to
public capital for smaller companies, designing new market offerings. We are
active in supporting complementary and well-targeted activities such as
financial literacy and the promotion of gender diversity initiatives - all of
which, done well, are value adding, increase participation in markets - and
are just the right thing to do. Domestically we aim to be at the core or hub
of the many spokes that make up the public capital markets.

As I have said now on a number of occasions, those public capital markets are
in the best shape I can remember them being. KiwiSaver and growth in savings
generally, for the first time have the critical companion of a reasonable
flow of quality product. The Mixed Ownership process may introduce many many
tens of thousands of new investors to the markets - this contribution to
building relevance of financial products for New Zealanders is a huge
opportunity for New Zealand, our capital markets and people. Markets and
financial investments are becoming almost as mainstream in conversations and
media as is the irrelevant - and that's progress.

A savings and investment culture, with quality product and good results will
do much to remove the hard to fathom still-lingering doubts caused by the
1987 era and legacy of poorly structured privatisations and hot air balloon
companies. It really is time for this country to move on from that period and
the excuses for inactivity and suspicion of financial markets that still lurk
in that cave. The reality is that financial security and wealth are created
by ownership of financial and other assets - not salary and wages alone. That
needs to be understood and people encouraged to structure their affairs
accordingly. The analogy of teaching people to fish, rather than giving them
someone else's catch, is pertinent.

The health of our markets is demonstrated not only by pre-registration
interest in Mighty River Power, but also by the successful execution of a
large number of other primary and secondary market transactions - including
some of real scale and others in the pipeline. Quality outcomes and
confidence in regulatory frameworks and their consistent application are key
to this continuing.

And on the theme of consistency and certainty, we hope that all political
parties consider carefully the impact of regulatory change and uncertainty on
New Zealand's ability to deliver the stability and consistency that markets
require to provide capital at the lowest cost to our businesses.  Global
capital allocators have choice as to where to invest. Yes, uncertainty around
the regulatory framework for Mixed Ownership Model companies is the most
recent, but by no means the only, example of regulatory uncertainty and
change that have affected a number of our leading companies. KiwiSaver
providers, managing money for New Zealanders of all generations and
circumstances, are already sending large proportions of their funds offshore
because of a perceived lack of suitable opportunities here. In so doing, they
are providing capital to economies and businesses other than our own. It
would be a tragedy if this is perpetuated and domestic first time investors
are also put off investment here because of perceived risks in investment in
New Zealand - the very environment which we should support and have home
advantage - especially now that product choice is emerging.

Some positive acknowledgments. NZX's own performance as a company and market
operator relies heavily on our technology group and a special thanks goes to
the hard work and world-class outcomes delivered in 2012 by our Head of
Technology David Godfrey and his team. This includes the successful NASDAQ X
Stream systems implementation - a credit to David and his team and the broker
community, all of which worked together for the good of the industry. It has
been a year of change in our regulatory approach and structures with further
steps taken to separate, and separate accountability for, regulatory and
commercial activities. Our Head of Regulation Robyn Dey has worked very
effectively with Tim and the board in driving and leading significant
enhancements in that area, and these are continuing. Our relationship with
the FMA and our shared aspirations continue to strengthen.

We are in an on-going phase of process improvement at NZX, across all areas
of the business - our new CFO Bevan Miller and Head of Operations, Mandy
Simpson are at the forefront of those activities. While we are conscious of
what is right and right-sized for our business, we are acutely aware of NZX's
particular need to show leadership and excellence in those areas, in
particular those that we set rules for and enforce in others.
Kathryn Jaggard, our Head of Derivatives, continues to drive that global
business with huge energy and commitment - and the results show it. Thanks go
to Erich Livengood, Sam Stanley and Tony Leggett for the leadership of the
Energy, Smartshares and Agri information businesses - Marcelle Ashcroft for
Link share registry's continued success and Ron Storey for our Australian
rural operations.

Pip Dunphy and Peter Lockery as independent chair and director of our
clearing house operation have again added much value.

June 2013 will see the retirement of some long-serving members of the NZ
Markets Disciplinary Tribunal. Thanks go to Peter Wilson, Phillip Meyer, Tim
Williams, Falcon Clouston and William Stevens for their contributions. We
look forward to welcoming new members to the Tribunal, thank those continuing
in office and also acknowledge the work of the members of the Special
Division of the Tribunal, chaired by Peter Wilson, that also regulates NZX
itself.

And, it doesn't go without saying - a thank you to you, our shareholders, for
your continued support.

Some comments on the board. There has been more change in board composition
over the last two years or so than normal and than any of us expect to see
continue. That said, we are fortunate to continue to have a well set board of
highly committed and talented individuals. Neil Paviour-Smith's leadership of
the Audit and Financial Risk Committee has been outstanding over what has
been a demanding year. New directors Alison Gerry, Therese Walsh and Simon
Power have made impressive starts to their time with us and are already
valuable contributors. Deputy Chairman James Miller continues to bring his
extensive capital markets experience to bear to our board deliberations and
we are looking forward to the contribution we know Jon Macdonald will bring.
We will miss Rod Drury's enthusiasm, energy and endless list of ideas - Rod
will say a few words to you later in the meeting. Sincere thanks go to my
fellow board members and I ask for your support for their election.

Dividend Policy

We have indicated that an update on dividend policy will be provided at this
meeting. Our current policy of a fixed amount per share, increasing by a
pre-split minimum of one cent per share, expires at the end of this year. On
our current post-split basis, a dividend of not less than 5.6 cents per share
is payable in respect of the current year, and I confirm that, absent
unforeseen events, we will at least meet this over our four quarterly
dividend payments. The board anticipates that from next year we will move to
a more conventional pay out ratio policy, with the normal solvency, working
capital, capital expenditure caveats.  More on that later in the year.

Andrew Harmos
Chairman

NZX Annual Meeting 2013
CEO's Address

Good morning, and thanks for the warm welcome. After exactly one year as CEO
of NZX, I thought it would be appropriate to reflect on the past year, and
outline the opportunities for our businesses as I see them going forward.

But first a brief comment on our first quarter revenues that we released this
morning. Overall revenues were up 4% over the first quarter of 2012 and
broadly in line with our expectations.

Within the businesses, the picture is more mixed. Our agricultural
information businesses were impacted by the drought conditions we've
experienced across most of New Zealand. Faced with adverse conditions,
farmers largely stopped spending, and rural advertising spend followed suit.

Securities data revenues declined as a result of the impact of a higher New
Zealand dollar and decreased spending in the capital markets businesses,
which has been experienced by all exchanges, not just NZX.

By contrast, our Market Operations businesses - the Fonterra Shareholders'
Market and the Electricity Market - performed slightly ahead of expectations
due to higher than expected development work.

More positively, capital markets revenues (listing, trading and clearing)
were up 13%, reflecting a strong increase, 54%, in the value of trading
activity in the first quarter of the year. This was in part due to a number
of one-off sell-downs, but also an increase in underlying volumes, which were
up 14%.

Reflecting on what someone mentioned to me was a fast year that went very
slowly, it was in a lot of ways a year of two halves. Internally, we spent
much of last year addressing an unsatisfactory level of staff turnover, the
breadth of the management teams, and putting in place appropriate systems and
processes for an organisation of our size and importance to the markets. All
three of which led to number of one-off charges, which were taken in the
middle of last year.

I am pleased to say that now we have a terrific team in place at all levels
of the organisation and have reduced staff turnover to manageable levels. We
have made some progress on improving our processes, in particular how we
manage our customers, but getting these to the level we expect will take more
time and will remain a priority for the reminder of this year.

Externally, the market environment has changed significantly in the past 12
months. In May last year the listing of Mighty River Power was delayed and
value traded in June and July was down 11% and 13% respectively compared to
the prior year.

As I mentioned, this changed dramatically in the fourth quarter with a number
of large sell-downs, and the listings of the Fonterra Shareholders' Fund and
Moa Breweries.

Significantly, it demonstrated to potential issuers the depth of the pool of
capital available in the New Zealand market. As a result we have the
strongest listing pipeline we have had in a decade or more.

This pool of capital is an early indicator of one of the two structural
trends that have the potential to significantly enhance long-term returns for
you, our shareholders. Those structural changes are the growth in KiwiSaver
assets, in conjunction with the Government share offer programme, and the
growth in demand for our agricultural commodities from China.

In 1990, the Australian sharemarket looked, on a couple of metrics, not too
dissimilar to the New Zealand's today. Market capitalisation to Gross
Domestic Product was 36%, and liquidity was 31%. NZX's numbers for 2012 was
32% per Dec12 monthly metrics and 45% respectively. Of course, Australian
market cap to GDP today is 103% and liquidity in 78% in 2012.

While there are a number of factors that have driven growth in Australia, the
fundamental drivers have been the introduction of compulsory superannuation
and the privatisation of CBA and Telstra.

We are at the starting point of the same journey Australia embarked upon 20
years ago. For NZX, it represents a generational opportunity to both grow and
participate in the growth of the capital markets.

We are therefore investing heavily in the rebuild of the market - supporting
growth in the listings pipeline, launching equity derivatives in the middle
of the year, and developing a new growth market for smaller companies, which
we hope to launch by the end of the year.

By the end of the third quarter, we will also launch an upgrade to nzx.com,
that will provide an enhanced set of information on companies that currently
do not enjoy analyst coverage. We are also looking at ways to increase our
exposure to the growth in assets under management and trading activity,
including the expansion of the Smartshares franchise.

A critical component of this is ensuring we continue to build confidence in
the markets, through our front line regulation and operation of the markets,
and the underlying technology on which it operates.

The growth in demand for soft commodities from Australia and New Zealand,
from China and the rest of Asia, is the second structural change, which plays
to NZX's strengths. The increasing investment requirements and price
volatility in the agricultural sector is generating significant demand for
high quality information and data, to better manage the underlying risks in
the business.

We have unique, high quality content in a number of commodities, largely with
an Australasian bias. We are in the process of shifting our content online,
first with Farmers Weekly and our other publications, and secondly with dairy
industry data in a new site, which will launch in late May.

The shift online allows us to both increase our reach and to implement new
revenue models. We are continuing to improve the relevance of the data we
provide, in particular the forward looking indicators of price or volumes and
the underlying drivers or supply and demand. The Pasture Growth Index is the
first example of this and we are starting work with one of the universities
this month to develop a forward indicator of milk price.

Finally, we also continue to look for small add-on acquisitions, which would
bolster the range and type of commodities we cover.

Ultimately, of course, we would like to offer a broad range of soft commodity
risk management products. While our first efforts in this area, Dairy Futures
and the Clear Grain Exchange have had, for different reasons, mixed results
over the past 6-12 months, we continue to believe the growth upside is
substantial. We are therefore spending a disproportionate amount of resources
in growing these businesses.

In both these structural shifts, the underlying opportunity for NZX is
significant. Our success will be determined not by the ideas we have but our
ability to execute well and engage with our customers and the market. It will
be an exciting time ahead.

Finally, I'd like to thank the Board, you, our shareholders and the
management team for your support over the last year. As Andrew pointed out, a
CEO transition is never easy, especially one from offshore, but your support
has made the potentially difficult, easy.

Tim Bennett
CEO
End CA:00235849 For:NZX    Type:ADDRESS    Time:2013-05-03 11:01:27