Property for Industry was right to complain about having to downgrade investor protection in its Constitution. A Stock Exchange should be able to stipulate minimum standards of protection and homogeniety in the products it auctions, to minimise investor search costs.

But there is no need to deprive shareholders of the power to stipulate for more protection than the minimum?

So why did the NZX do this?

The Listing Rules are the standard, and the standard is the brand, but NZX gave control of its brand to politicians seven years ago.

So listing rules are now treated as subordinate legislation, under power granted by the state.

For 150 years listing rules were the outcome of balancing by the auction house of the interests of its two vital classes of customer (investor and company promoter). The balancing was done by brokers who owned the auction house, as part of the natural resolution of conflicting interests that  intermediaries of all stripes can not avoid. They always have conflicting interests. They're paid to subject themselves to those conflicts. How they resolve them dictates whether they thrive or wither. That dynamic balance constantly adjusts as the intermediaries percieve risks to the continuation of their business from unhappiness by one class or the other, from a shift of the pendulum too far in one direction.

It is less effective as a corrective during periods when there is no choice of exchanges (or club of intermediaries). But it has become clear around the world that there is enormous potential for competition to be an Exchange.

Since NZX accepted the Faustian bargain of subordinating its rule-book to the State, it has acquired the habits and manners of a satrap to the ruler, not an intermediary. It is not free to fine tune rules (despite it becoming clear that they have discouraged listing). It has to negotiate changes with the Minister's officials. So it seems not to have tried.

Of course a Minister's incentives are dramatically different from those of an intermediary which must keep both sides happy enough to continue dealing. The Minister's main risk is bad media. So the political (ruler's) influence is asymetric. He'll suffer if some punter has a newsworthy complaint about a loss or disappointment that could have been averted with a rule in the Minister's power to impose.

He'll not be held accountable for rules that drive away listings or chill director willingness to take profitable risks. Nor will he likely reap much credit for rules that foster growth in an Exchange. Those who propose them will get that. A Minister suffers little if he leaves in place rules that  result in directors putting more energy into arse covering compliance processes than into assessing and taking risks to make money for their companies and their shareholders.

And so we have sorry mistakes persisting, like the  Australian model continuous disclosure rules that are unsuitable for most companies of the size we would like to see maturing to listing.

Property for Industry will shortly have a choice. NZX may get the power to start markets where the rule book isoutside the Minister's control. That poses a risk for NZX and the Minister, if investors think that any NZX market remains covered by the de facto Ministerial guarantee.

Or Property for Industry could move to Unlisted which is clearly not hitchhiking on any de facto guarantee of state prescription of its rule book. . And Unlisted should now crank up its rule making to stipulate the kinds of quality standards that meld the needs of investors and companies.

Disclosure – I have a shareholding in Unlisted and have acted professionally for it (and for the NZ Stock Exchange)