SEC sets to reduce transaction time

Yemisi Izuora

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The Security and Exchange Commission has said that Capital Market Committee was working to reduce the settlement cycle for transactions in the capital market and on other initiatives that would speed up the development of the market and to make trading activities easier for the investing public.

The Acting Director General, Securities and Exchange Commission, Mr. Mounir Gwarzo, revealed this while addressing Capital Market Committee and other stakeholders at its quarterly briefing in Lagos.

He explained that investors must settle their security transactions in one business day. This settlement cycle is known as T+1 – shortened for “trade date plus one day.”

This rule means that when you buy securities, the brokerage firm must receive your payment not later than one business day after the trade is executed. “When you sell a security, you must deliver to your brokerage firm your securities certificate no later than one day after the sale”.

Gwarzo noted, “How you hold your securities either in physical certificates or in electronic accounts can affect how quickly you are able to deliver them to your broker.

“The T+1, in electronic entry form means transaction plus one day, is one the measures adopted by SEC in line with the recommendations by stakeholders in the market to strengthen the modus operandi of the stock market and prompt settlement after stock transactions.”

He further stressed that financial investment was extremely important in every economy for economic growth and development. In recognition of this, he added that the activities of the stock market were greatly needed so that funds can easily be mobilized by both public and private sector.

According to him, “Investment increases the productive strength of the economy and GDP per capita. The provision of funds for investment involves the activities private individuals, institutions, government and essentially the stock market.

“The stock market is paramount for mobilization of funds for short term and long term investment which is key to growth in every economy.

Also discussed according to him, was the decision by the CMC to review transaction costs in the market. Gwarzo explained that a reduction in transaction costs was expected to boost market participation.

He said, “We believe that when we reduce some of these costs, it will propel further transactions in the market. A detailed work was done and a presentation was made and members contributed to it and a small committee would be set up. So, at the next CMC (meeting) we will able to come with an idea of what the costs in the market are going to be.”

Gwarzo said the CMC also discussed the issue of dematerialisation, which involves the conversion of physical certificates to electronic certificates, stressing that it was time to get it done.

“We all agreed by the next CMC (meeting) we should be able to come up with the final blueprint on dematerialisation, including how we are going to address some of the legacy issues,” he said.

In addition to that, he said talks were held on how to revive the corporate bond market as the bond market had been dominated by government bonds for years.

According to him, efforts are also being intensified to revive the Nigerian Commodities Exchange Market, and to ensure that more of the country’s pension funds are invested in the capital market.

The Managing Director, Central Securities Clearing System, Mr. Kyari Bukar, said that the enhanced service would ensure that messages and alerts were delivered in real time to customers.

To ensure that they benefit from the new notification system, Bukar advised customers to ensure that they provide their brokers with up-to-date mobile phone numbers and email addresses.

According to him, this will enable the notification system to work effectively and provide timely update on all account transactions.

He explained that the new notification system had added benefits such as effective fraud alert in cases of unauthorised transactions on a customer’s account, reduction in time spent confirming transactions and an enhancement of transparency between trader and client.

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