Equities and the NZX cash market
This domain covers how cash equities trade in New Zealand: the market structure, order and settlement mechanics, corporate actions, and the disclosure and takeover rules that surround listed companies.
Market structure
NZX operates the Main Board for equities and the Debt Market, alongside a derivatives market. Trading runs through NZX participants (brokers) in a continuous session during the day, bookended by an opening pre-open period and a closing auction that sets the official closing price. Orders are typically limit orders or market orders; price and volume limits and trading halts apply to contain disorder.
Settlement is on a T+2 basis, with the NZX settlement and depository system holding securities electronically, so investors generally hold beneficial interests through a broker nominee rather than paper certificates.
Corporate actions
Dividends, bonus issues, rights issues, splits and buybacks all require you to know the ex-date and record date. Buying on or after the ex-date means no entitlement to that dividend. New Zealand dividends usually carry imputation credits because company tax is paid at 28%.
Ownership rules
The Takeovers Code is triggered at 20% of voting rights; a creeping allowance lets a holder below 20% increase by up to 5% in 12 months. Substantial security holder disclosure applies at 5% and in 1% movements thereafter.
Worked example
A company pays a 12 cent fully imputed dividend. Imputation credits = 12 × 28/72 = 4.67 cents, so the gross taxable dividend is 16.67 cents. A 33% investor owes 5.50 cents tax, less 4.67 cents of credits, leaving 0.83 cents of RWT: net cash 11.17 cents per share. A 28% investor receives the full 12 cents with no further tax.
Traps
Confusing record date with ex-date. Forgetting that imputation credits are not cash. Assuming a share price falls by the full dividend on the ex-date.