Modupe Gbadeyanka
By Modupe Gbadeyanka
In order to curb infractions at the market and stop situations where investors lose their money unnecessarily or even lose confidence in the capital market, the Nigerian Stock Exchange (NSE) has said it would go very tough on any stockbroker who engages in manipulative trading and marking the close.
In a circular to brokers yesterday, which was obtained by Business Post, the NSE said any dealing member or firm caught in such acts would be severely punished with fines or revocation of operating licence where necessary.
Marking the close involves attempting to influence the closing price of a stock by executing purchase or sale orders at or near the close of normal trading hours.
This act includes approving or entering an order at or near the close of the market, with the primary aim to change or maintain the closing price of a security traded on the NSE.
In the circular, authorities of the local bourse said this act, which is prohibited, can artificially inflate or depress the closing price for the security.
Citing Rule 17.13: Prohibition of Market Manipulation and Illegal Market Dealings, Rulebook of The Exchange 2015 (Dealing Members Rules), specifically Rule 17.13 (a) and (b)(4), the Head of Broker Dealer Regulation at the NSE, Mr Olufemi Shobanjo, said the stock exchange “prohibits dealing members from engaging in such activity,” advising “dealing members to ensure strict compliance with the provisions of the rules to avoid regulatory sanctions.”
Business Post reports that the aforementioned rule states that, “(a) No Dealing Member may –(1) Either for its own account or on behalf of another person, directly or indirectly use or knowingly participate in the use of any manipulative, improper, false or deceptive practice of trading in a security listed on The Exchange which practice creates or might create –(A) a false or deceptive appearance of the trading activity in connection with; or (B) an artificial price for, that security;
“Place an order to buy or sell listed securities which, to his or her knowledge will, if executed, have the effect contemplated in sub-rule (a).”“(b) Without limiting the generality of sub-rule (a), the following are deemed to be manipulative, improper, false or deceptive trading practices:
“(4) Approving or entering an order at or near the close of the market, the primary purpose of which is to change or maintain the closing price of a security traded on the floor of The Exchange.”
In addition, the NSE warned stockbrokers against the circulation of false, misleading or inaccurate information and stay away from front running.
It stressed that any one found guilty of these infractions would pay a “fine to be determined by the exchange based on the circumstances of the case and which fine shall not be less than N500,000; and suspension of the Dealing Member for such period as may be determined by the exchange; or expulsion of the dealing member.”
It further said, “Dealing Members shall not take advantage of an order or a block transaction, that may influence the price of a security, issued by a customer or a group of customers nor shall the Dealing Member trade ahead of customers in the same direction of their orders before the said customers have executed their orders, which may result in the Dealing Member profiting from and illegally taking advantage of the customers.
“Dealing Members are prohibited from making any deals or recommendations to others to trade in the same direction of the orders before the execution thereof.”
The NSE emphasised that all dealing members have a duty to ensure that all information, advertisements, brochures, circulars and publications are accurate, clear, fair, made in good faith and inoffensive.
