By Dipo Olowookere
When investors do not have confidence in a country’s capital market, then there is a big danger because the market segment is one of the lifelines of any economy.
In order not to put the Nigerian economy in crisis, the Nigerian Stock Exchange (NSE), under the leadership of Mr Oscar Onyema, has come up with different initiatives.
One of these is the use of technology to run a transparent stock exchange, which has been commended by stakeholders in the industry.
At the moment, it is difficult for stockbrokers to trade shares of clients without first getting the approval of the owner.
In an interview with Vanguard, a Stockbroker and Chief Relationship Officer with Foresight Securities & Investment Limited, Mr Charles Fakrogha, said the use of technology by the NSE has helped to restore confidence investors have in the country’s capital market.
According to him, technology has allowed stockbrokers give their clients codes so as to validate trade orders.
He said this smart trading allow customers use their smart phone to trade anywhere in the world, explaining that it means they can put in their order, but before those trading orders will get to the trading engine, the stockbroker who gave the client the access must have validated the order. So, it is also making business easy for the capital market.
“Operators can now reach as many of their clients as possible unlike before when they have to manually put in the order.
“So, technology has done a lot in terms of enhancing the market. At the same time, it also has a flip side. Technology has also posed problem in terms of hacking, in terms of cyber-crime, but the measures put in place by the information technology department of the stock exchange and constant training and re-training of operators, to ensure that their system is fire proof, has helped in plugging the leakages.”
Furthermore, Mr Fakrogha said, “All the stockbroking firms have enhanced their Information Technology (IT) capability; most firms now trade remote. Most firms now have what is called Order Management System (OMS), where clients can put in their orders from any part of the world and those orders will get to the trading engine of the stock exchange, of course, validated by the trader before they get to the trading engine.”
Commenting on capital market infractions, the renowned stockbroker said, “Infraction has nothing to do with technology; it is integrity. However, technology has a role to play. There is a system at the Central Securities Clearing System (CSCS) initiated by the stock exchange.
“If I buy or sell for a client, the client gets automatic alert. That is what is called Trade Alert. If I as a stockbroker, I buy or sell for a client, he/she receives trade alert on his/her phone. So, if the client sees a trade on his portfolio that a broker has sold and did not give the mandate.
“Of course, it is obviously, an unauthorized sale. It is left for the client to report the transaction to the appropriate authorities. If the client did not do anything, of course, the stock exchange will not know.
“So, when a client is opening their trading account, they must insist that they will like to have a trade alert. The trade alert is now made compulsory. As soon as a client fills the form and you send it to the CSCS, automatically, the investor will be on trade alert.
“It is a very good innovation and it has been on for a long time. So, when the unauthorized sale takes place, the investors can make a report and where the broker cannot give reasonable explanation, the investor can take it up at the level of the Nigerian Stock Exchange and the problem will be resolved.
“As for me, I think technology has played a major role in terms of checking unauthorized sale, unlike in the past when a broker will sell and the client will not get any notice until one or two years after.”
On the direct cash payment to customers introduced by regulators, Mr Fakrogha said, “With direct cash settlement, if I sell shares for a client, all the proceeds will not come to my account. It is only my commission that comes to me while the proceeds go to the client.
“For us, that is a major breakthrough in terms of technology. This has come to also eliminate market infraction and this is major breakthrough on how technology has assisted to bring sanity in the capital market. It will interest you to know that Foresight is one of the stockbroking firms at the forefront of implementing the stock exchange’s direct cash settlement initiative.”
