NSE WARNS MARKET MAKERS AGAINST VIOLATING RULES
In its bid to sustain market integrity and ensure sanity in its operations, the Nigerian Stock Exchange (NSE), has said that licences of Market Makers whose programme is slated to commence on September 18, on the floor of the market will be withdrawn if found wanting of transaction complicity.
The NSE Chief Executive Officer Mr. Oscar Onyema, gave the warning yesterday, adding that there would be no compromising the zero tolerance posture of the Exchange on the issue of infraction, at a one-day workshop organised by the Exchange on the 'Market Making, Securities Lending and short selling programme.
He noted that another step to check infraction of any kind on a lighter note is to deduct 10 per cent value of total transaction engaged in by the defaulting Market Makers amongst others.
Onyema who said the Market Making programme will be carried out in face of limited securities at a time, informed the financial market community that the market will roll out the rest of the securities over a period of six months.
'We are going to roll out over a six months period. During that period, we are going to learn a lot. There has been a lot of efforts that has gone into this. When it comes to the ability to lending securities, we know that AMCON will lend the credit. With regards to retail participants, we want to start with professional (institutional investors) to manage the risk and the process. The whole idea at the end of the day is to improve the market quality. The primary market maker will be there to provide liquidity where you don't have liquidity. By allowing a very symmetrical market there will be a lot of sanctions for defaulters' he added
Explaining how the programme will go, the Head of Transformation at NSE, Mr. Olumide Lala, said the lower/upper trading limit will be increased from five to 10 per cent for securities that get rolled out into the programme.
Lala who noted that no 'naked selling' will be entertained in the operation of Market Maker on the Exchange, stressed that Covered selling will be allowed even as there will be no failed trade.
Among companies selected by the ten Market Makers to act in the pilot scheme includes; PZ Cusson, Presco, International Breweries, Lafarge Wapco, Fidson Healthcare, Redstar, DN Meryer, Diamond Bank, Fidelity Bank, Nigerian Breweries, Guaranty Trust Bank and UAC Nigeria Plc.
The programme which will debut in the market on September 18 is expected to play a central role in the provision of 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, allowing both market makers to provide two-way quotes and licenced broker/dealers of The Exchange to submit orders as currently done, will be operated from the commencement date of this key initiative.