The Nigerian Stock Exchange (NSE) and Central Securities Clearing System (CSCS) Plc. have concluded arrangements to commence post-trade allocation service to operators on the NSE by December 1, 2015.
Addressing market participants at a forum in Lagos recently, the Operations Manager, Market Operations and Technology Division of the NSE, Mr. Ken Nwafor, assured participants during the engagement that in the overall interest of the market, rules guiding the post-trade allocation service, which is currently on the NSE website, will be made available not only to them, but also to the investing public via the website of CSCS and the print media.
In addition, Mr. Joe Mekiliuwa, General Manager, Operations at CSCS Plc. Explained that the introduction of the Post-Trade Allocation service into the Nigerian capital market will significantly reduce error trades by brokers and improve quality of trade execution.
“The post-trade allocation service would create liquidity, improve trade settlement experience in the market and enable brokers to buy securities en-block thereby saving time of buying into separate accounts. This service will be available on a web-based platform”, said Mekiliuwa.
Mekiliuwa allayed fears that the process could lead to impartiality and allow for favoritisms during trade allocation. “An agreement has been reached among brokers that the allocation of the purchased securities would be done at the discretion of the brokers based on fairness, equity and justice. When mandate to transact is received by the brokers, CSCS will ensure that the post allocation will be strictly between the custodians and the brokers. No interference whatsoever from our end besides providing the platform for the service”, he added.
In the event where any client is erroneously allocated more than the mandated volume, Mekiliuwa explained that the system will not automatically detect such errors. He however noted that if such is discovered on the day of allocation, CSCS would correct it without any applicable service charge. “Service charge to correct error becomes applicable if it is discovered as from day T+1”.
The post-trade allocation concise process flow include amongst others allocation of pool account opened under the custodians, remote trading access to single account granted to brokering firms. Others include; purchase of stocks en-bloc or in tranches into the pool account via the remote trading window based on clients’ mandates on trade day by the brokers, and authorization by CSCS to redistribute all purchased securities to the target accounts domiciled with the custodians at the end of trade by brokers.
In the event of a brokering firm purchasing above the mandated volume, custodians were advised to report to the NSE and CSCS, any brokerage firm who fails to comply with the stipulated rules for sanctions.
The meeting which had participants from stockbroking firms, custodians, the NSE and CSCS Plc ended with the advice that the market should be at alert as phishing mails from hackers are on the increase.