Nigerian Stock Exchange launches market making programme
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Nigerian Stock Exchange launches market making programme 21 September 2012Lagos Reporter: Jenna Jones
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The Nigerian Stock Exchange (NSE) has launched its market making programme. The new programme commenced on 18 September 2012.
According to the head of transformation and change at the NSE, Olumide Lala, market makers will play a key role in facilitating two-way quotes (comprising of buy and sell prices) for the securities that they are making markets on.
Leveraging the securities lending process, market makers will be able to borrow securities in order to settle ‘buy order imbalances’ from customers. A ‘hybrid’ market wil operate, allowing both market makers to provide two-way quotes and licensed broker-dealers of the exchange to submit orders.
The NSE hopes that the market making programme will provide for lending and borrowing of securities, enabling investors to earn returns on their ‘idle’ stocks while contributing to market liquidity through legitimate investment activity in covered short selling.
On 11 September, the exchange held a market-wide workshop to familiarise market stakeholders with the rules and operational guidelines for the programme.
The workshop brought together experts in market making, securities lending and short selling with settlement banks, pension fund administrators and insurance companies.
The NSE designated Stanbic, Renaissance Capital, Future View Securities, Vetiva Capital and ESS/DunnLoren Merrifield as market makers in April.
Oscar Onyema, CEO of the exchange, said at the time of the designations: “This is a great milestone and a major step in the direction of turning the market round to have liquidity and depth back into the market. We will continue to move forward on this.”
“The companies selected went through a very rigorous process and met the minimum net capital requirement of N570 million. We also examined their compliance history and looked into their operational capabilities including their technology and processes. The selected firms were taken through trainings, debated the appropriate market structure to be used and the exchange further went through the approval of the Securities and Exchange Commission in the selection process.”
Earlier this year, the Nigerian Securities and Exchange Commission approved United Bank of Africa and Stanbic IBTC as securities lending agents for equities and bond transactions at the NSE.
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