Nine years after the Nigerian Exchange Limited (NGX) introduced the market-making programme, the exchange has just disclosed his plans to relaunch the programme as part of efforts to deepen the market, enhance its liquidity and increase efficiency across asset classes, effective October 4, 2021.
The NGX revealed in a statement after it recently reviewed its rules to ensure flexibility to implement diverse market-making programmes across all asset classes listed on the local bourse and as approved by the SEC.
According to the exchange in the disclosure, the market makers across its product classes will include ABSA Securities Nigeria, CSL Stockbrokers, Vetiva Securities, Stanbic IBTC Securities, Chapel Hill Denham Securities, FBN Quest Securities, and United Capital Securities.
For clarification and understanding purposes, market making occurs when a trading license holder (TLH) provides continuous two way quotes (buy and sell prices) to the market during a trading day on some selected securities. In essence, market makers exhibit the amount they are willing to buy or sell a security and the assured number of units. Once they receive an order from a buyer, they sell off from their own inventory, ensuring that the order is completed.
Temi Popoola, the chief executive officer, NGX, while speaking on the relaunch said: At NGX we are committed to tackling liquidity constraints and ensuring sustained flow of funds in the capital market. We recognise the importance of liquidity as a driver of participation in our market and are confident that Market Making will ease the barrier of entry and exit, whilst providing a measure of control over volatile price fluctuations.
“As we continue to consider ways to maximise opportunities across our value chain, our goal is to evolve with the increasingly sophisticated needs of our stakeholders and Market Making is just one of the strategies we will deploy in this regard. We also wish to thank the SEC and CSCS for their contribution towards the relaunch of the programme,” he concluded.
Also commenting on the programme, Jude Chiemeka, who is the divisional head, trading business, NGX, said: “The benefits to be reaped from Market Making cut across the spectrum of our market. For the Market Makers, they can expect enhanced revenue opportunities as well as reduced transaction and regulatory fees in recognition of the responsibility and risks they have taken on. There are also the benefits of increased liquidity, greater market depth, enhanced portfolio diversification, and more, that other capital market players will enjoy. To ensure that the market indeed reaps the benefits, we have been painstaking in our selection of Market Makers and we encourage investors to leverage the opportunities they bring to the table.”
Meanwhile, the exchange also revealed that the relaunch of the programme after almost a decade will allow for periodic adjustments to meet the core objectives of the programme while it takes into consideration the evolving needs of stakeholders.