BY OLUSHOLA BELLO, Lagos
Nigerian Exchange (NGX) Limited has relaunched its market making programme to boost liquidity and ensure sustained flow of funds in the capital market.
The market making programme commenced on October 4, 2021, on the back of the review of its rules to provide flexibility to implement diverse market making programmes across all asset classes listed on the Exchange, as approved by the Securities and Exchange Commission (SEC).
Market making occurs when a trading licence holder 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.
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.
Speaking on the programme, chief executive officer of NGX, Mr Temi Popoola, said: “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.”
The divisional head, trading business, NGX, Mr Jude Chiemeka, explained that “the benefit to be reaped from market making cuts 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.”
Recall that NGX first launched the market making programme in 2012 in an effort to improve liquidity and increase efficiency across asset classes.