NGX Partners Stakeholders To Reduce Settlement Cycle

Due to the current reforms and competition among Exchanges in global financial markets, Nigerian Exchange Limited (NGX) has revealed that it is working with the Central Securities Clearing System (CSCS) Plc and other stakeholders to reduce the settlement cycle from T+3 to T+1 over the next few years.

Settlement Cycle refers to a calendar according to which all purchase and sale transactions done on T Day (transaction day) are settled on a T+3 days basis

This was even as the Exchange said it will continue to seek and explore the use of advanced technological tools such as Straight Through Processing (STP) of equity transactions to enhance transparency in the Nigerian capital market (NCM).

The divisional head, Capital Markets, NGX, Jude Chiemeka stated this during the virtual NGX Retail Workshop themed; ‘STP of Equity Transactions’, organized in collaboration with CSCS and United Capital in Lagos.

Chiemeka explained that the equities market is constantly evolving and it is imperative that the Exchange keep up with the latest trends and technologies to ensure that as a platform provider, it provide investors the best possible service.

According to him, STP is a mechanism that automates the end-to-end processing of transactions of financial instruments and also provides a means of electronically capturing and processing transactions from the point of first deal to final settlement.

Citing examples of how well STP worked in other climes, Chiemeka said that STP which was launched in India last year with a settlement cycle of 15 days, now has a cycle of 2 days, thus putting the India capital market in the elite group of advanced markets of the world.

He added that the NGX is working assiduously with the CSCS and other stakeholders to reduce the settlement cycle from T+3 to T+1 over the next few years, saying that “however, this initiative can be achieved with the use of technology such as STP.

“In view of this, NGX will continue to explore the use of advanced technological tools such as STPs to ensure that the investing public conduct their transactions in a more efficient and seamless manner”.

Also, the Regional head, Business Technology and Digital Innovation at CSCS, Tobe Nnadozie, said that the mechanism will create seamless settlement for investors and help to get real time enterprise Know-Your-Customer (KYC) integration, saying that even though the STP might be expensive now, it will become cheaper in the long run.

For her part, Digital Channels and Partnerships lead at United Capital Securities, Martha Ehizele, the STP mechanism will help in bringing youths (especially those who are not investing) to the capital market.

The head, Investor Service Product Management, Transactional Products and Services at Standard Bank Group, Hari Chaitanya, said the STP is quick and allows investors to have easier access to wide range of products, mitigate risks and reduces cost of operating in the market.