Nigeria equities exchange proposes additions to rules for price stabilization of securities

The Nigerian Stock Exchange has announced additions to its rules for price stabilization of securities traded on its floor and has called on stakeholders to be part of the rulemaking process by rendering comments on the proposed amendments.

According to a notification to stakeholders seen on its website Wednesday, the proposed rules would include definition of key terms, permitted price stabilization and permitted stabilizing activities, over-allotment, and requirements for price stabilization.

Others are stabilization period, price conditions, eligibility criteria for stabilization Managers, responsibilities of the stabilization manager, and disclosure and reporting obligations of the stabilization manager, amongst others.

The Exchange noted that stabilization of securities creates a regulatory framework for ‘the buying of a security for the limited purpose of [preventing or] or retarding a decline in its open market price in order to facilitate its distribution to the public.

“Price stabilization is aimed at supporting and maintaining the price of listed securities for a limited period after the listing or offer, thus establishing an orderly market for securities in the immediate secondary market after an offer,” the local bourse said.

The purpose of the proposed Rules for Price Stabilization of Securities(“proposed Rules”), is to define the circumstances and manner in which price stabilization will be permitted by The Exchange, in accordance with the provisions of the Investments and Securities Act (ISA), Consolidated Rules and Regulations of the Securities and Exchange Commission, 2013 (SEC Rules), and the Rulebook of The Exchange.

The proposed Rules address the parameters of substantive price support in securities offerings. In addition, they serve as a defence to the necessary extent against prohibited trading practices, such as market manipulation, and breach of market abuse rules.

“Given that transparency is a prerequisite for the prevention of market abuse, it is important to ensure that adequate information is disclosed or reported prior to, during, and after any trading effected for the stabilization of securities, in order to avoid market abuse and illegal market practices,” adding that market integrity requires adequate public disclosure of stabilization measures.

“We are involving as many stakeholders as possible in this rule making process in order to achieve the aforementioned goals. Please be assured that your comments will be considered in arriving at the final text of the rules,” it said