ABSENCE OF RULES IS STALLING MARKET MAKING - STAKEHOLDERS

Some stakeholders in the capital market have said that the delay in approving securities lending rules by the Securities and Exchange Commission (SEC) was stalling activities of market makers. Securities lending is the practice of lending a stock, derivative, other security to an investor or firm.

Market maker is a broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security to facilitate trading in that security.  They said that market making would not start  without the necessary structure. This structure involves rules on securities lending, short selling and sustainable credit lines.

Mr Emeka Madubuike, Chairman of Association of Stockbroking Houses of Nigeria (ASHON), said that the inability of SEC to establish this structure had made it impossible for market making to start. 'Market making cannot start without securities lending and short selling. The rules and processes also must be in place,' he said.

Malam Garba Kurfi, the Chief Executive Officer of APT Securities and Funds Ltd., said that market makers needed providers of liquidity that would generate seamless transactions.  Kurfi said that aside from the creation of market making and securities lending in principle, the operational rules and structure were absent to sustain activities of market makers.

He warned that the impact of the market makers would not be felt until the central bank provided credit windows for market markers through commercial banks.

Kurfi said that it was possible for market making to start effectively in the third quarter when all the bottlenecks would have been sorted out.