The planned Over-the-Counter (OTC) market which has been on a test run since February, is ready for take-off as four banks –Access Bank plc, Guaranty Trust Bank plc, Sterling Bank plc, and United Bank for Africa plc – have been confirmed to settle deals at the market, overseen by the National Association of Securities Dealers (NASD).
The OTC market is a trading network which seeks to ease secondary market trading of all non-quoted securities in the West African region, thereby stimulating growth through more efficient capital raising processes.
BusinessDay learnt that out of the seven banks that were pre-confirmed, these four banks qualified for this role of settling trading, estimated about N10billion monthly, approximately a N120 billion annual turnover.
The NASD plc has already leased some trading platforms from the Nigerian Stock Exchange (NSE), and hopes to have the first cash-backed trade by middle of May 2013.
In addition to the four banks,14 broker/dealers and seven issuing houses have registered to operate in this market whose clearing transfer will be through the Central Securities Clearing System (CSCS).
The 14 broker/dealers that have registered to operate in this market are Anchoria Investment & Securities Limited; BGL Securities Limited; Capital Assets Limited; Capital Bancorp plc, Chapel Hill Denham Securities Limited, Equity Solution Capital Limited, FCSL Asset Management Company Limited, Greenwich Securities Limited, GTI Securities, Icon Stockbrokers, Lead Securities & Investments Limited, Marina Securities Stockbroking Services, Partnership Investment Company Plc, and Signet Investments& Securities Limited.
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The registered issuing houses are BGL Securities Limited, Capital Assets Limited, Capital Bancorp Limited, Greenwich Trust Limited, GTI Capital Limited, Marina Securities Limited, and Partnership Investment Company Plc.
This new exchange in the Nigerian capital market brings together issuers, individual and institutional investors, accredited dealers, stockbrokers, banks, central clearing systems, private equity and venture capital firms and depositories, with a view to increasing liquidity in the non-quoted segment of the long term funding market.
A key market source told BusinessDay, “The underlying potentials of this market are already speaking volumes, as our investigations reveal that an estimated 19,000 plcs in Nigeria today, are not listed –most of them are not registered with the Securities and Exchange Commission (SEC) but are registered with the Corporate Affairs Commission (CAC) . Having a minimum of 50 shareholders makes a company a plc.
With the NASD OTC platform, analysts say that there is a lot of potential for trade on unlisted securities.
To ensure that this market maintains strict integrity, Bola Ajomale, managing director, NASD plc, told BusinessDay that there are mechanisms in place to ensure that defaulters of rules guiding registered operators are locked out of the market. “We expect to have a strong research and compliance team in this market,” he said.
“We are hoping that even if 1,000 plcs are listed in the NASD OTC market, there would be a significant daily trading volume,”.
By implication, this market is capable of delivering about N120billion in volume of trade, through better reporting, benchmark for stock pricing; and creating a mechanism for free transfer of securities from one owner to another.
Analysts say the interesting thing about the market is that young entrepreneurs can now have windows of capital raising to grow their businesses, a development which will create more jobs in the country.
There are already trading rules for this market at the Securities and Exchange Commission, awaiting approval, but at the NASD OTC market, trading fees will be far below what obtains at the Nigerian Stock Exchange (NSE).
For buying and selling of shares at the Nigerian Stock Exchange, the brokers commission is 1.4175 percent of consideration; SEC Fees (0.3 percent of consideration); CSCS Fees (0.063 percent of consideration for buying and 0.378 percent of consideration for selling); Stamp Duties (0.075 percent of consideration); NSE Fees (0.315 percent of consideration).
