The Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) have issued guidelines for the settlement of all types of securities in the country. This is part of their statutory mandate of promoting and facilitating the development of efficient and effective systems for settlement of transactions.
According to the new guidelines, procedures for the settlement of securities, including the rights and obligations of the parties involved in every transaction are clearly provided.
It also covers the settlement procedures and settlement cycle for the trades executed in the Nigerian Stock Exchange traded securities, FMDQ Over The Counter (OTC) Securities, NASD Over The Counter (OTC) Securities, Nigerian Commodity Exchange (NCX) traded securities and Afex Commodities Exchange.
By the guidelines, parties to Securities Settlement include but not limited to Capital Market Registrars, CBN, NSE, Central Securities Clearing System (CSCS) PLC (Central Securities Depository -Clearing & Settlement Agent), Deposit Money Banks (DMBs), Custodians, Dealing Members Firms Page, Discount Houses and Nigerian Commodity Exchange (NCX).
A statement issued to herald the new policy on CBN website showed that the general rule is that any securities transaction must trade or be reported through a licensed Exchange in line with the standard settlement guidelines.
It read in parts: “After each day’s transaction (Day T), the clearing/settlement agent (CSCS) shall generate the financial obligations of each dealing positions of the dealing member firms based on their respective settlement banks to arrive at net position per settlement banks,” CBN said.
For Federal government securities, after each day’s transaction (Day T), the clearing/settlement agent shall generate the financial obligations of each dealing member firms. It added that the clearing/settlement agent shall generate the financial positions of the dealing member firms based on their respective settlement banks to arrive at net position per settlement banks.
Also, federal government securities (primary auction), the guideline directed that among other things, after the release of auction result, the Government Securities Issuing Agent shall notify each successful Bidder (primary dealer) their financial obligations. The successful Bidder shall fund its account with the Government Securities Issuing Agent for settlement on or before Day T+2.”
According to the apex bank, the main aim of this guideline is to promote competitive, efficient, safe and sound post trading arrangements in Nigeria. This should ultimately lead to greater confidence in securities markets and better investor protection and should in turn limit systemic risk. In addition, the guidelines seek to improve the efficiency of the market infrastructure, which should in turn promote and sustain the integration and competitiveness of the Nigerian securities markets, according to the gridline.
