Investors have reacted positively to a new Securities and Exchange Commission’s (SEC) rule on trading unlisted securities, according to the NASD OTC.
“Last week, we reported mixed reactions from various stakeholders to the Securities and Exchange Commission’s (SEC) Rule on Trading in Unlisted Securities,” NASD said in its weekly newsletter.
“It would appear that investors are also not left out as we have witnessed an 85 percent increase in the number of trading accounts opened by investors for their over-the-counter transactions post-release of the SEC rule.”
The new SEC rules make it illegal to transfer public securities through dark pools and away from the apex regulators oversight. It also imposes a restriction on those who can act as transfer agents – the service can now only be legally carried out by qualified stockbrokers (in good standing with the SEC and NASD OTC).
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This brings to an end a long-standing regime of non-authorised operators (nicknamed ‘jobbers’) brokering unrecorded transactions.
The new set of rules also expands the horizon of publicly tradable securities and opens up a new terrain for the country’s fast-growing (possibly underinvested) pension deposits.
Stakeholders say that the increased interest from investors could help improve liquidity in the Nigerian capital markets.
According to the Nigerian Capital Market Master Plan (2015-2025), the country has an average daily trading volume of $26 million and a turnover rate of just over 10 percent for the equities market while Malaysia has corresponding rates of $647 million and 107.6 percent.
The value of Assets under Management (AUM) is equally low, amounting to $910 million compared with the Malaysian value of $114 billion.
“In this regard, we are committed to the maintenance of a platform for enhancing the liquidity in the capital market through OTC trading and are optimistic that the release of SEC’s rule on unlisted public securities will help in achieving this,” NASD said.
