Aduragbemi Omiyale
By Aduragbemi Omiyale
After receiving approval from the Securities and Exchange Commission (SEC), the Nigerian Exchange (NGX) Limited has relaunched its Market Making program.
The scheme, which is part of the efforts of the exchange to deepen liquidity at the nation’s capital market, became effective from Monday, October 4, 2021.
The market making initiative was initially stopped to allow for a review of the rules to provide the flexibility to implement diverse market making programmes across all asset classes listed on the exchange.
Market making occurs when a trading license holder (stockbroker) provides continuous two-way quotes; both buy or sell prices, to the market on selected securities during the trading day.
Essentially, market makers display the amount they are willing to buy or sell a security and the guaranteed number of units. Once they receive an order from a buyer, they sell off from their own inventory, ensuring that the order is completed.
Speaking on the benefits of the scheme, the Divisional Head of Trading Business at NGX, Mr Jude Chiemeka stated that, “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.”
In his remarks, the Chief Executive Officer of NGX, Mr Temi Popoola, stated that, “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 program,” he added.
It would be recalled that NGX first launched the market-making program in 2012 in an effort to improve liquidity and increase efficiency across asset classes.
This relaunch takes into consideration the evolving needs of stakeholders and will allow for periodic adjustments to meet the objectives of the programme.
NGX market makers across its product classes include ABSA Securities Nigeria, CSL Stockbrokers, Vetiva Securities, Stanbic IBTC Securities, Chapel Hill Denham Securities, FBN Quest Securities, and United Capital Securities. The list of Market Makers and their selected securities can be found on www.ngxgroup.com.
