The stakeholders in Nigeria’s Over-the counter (OTC) market for Unlisted Securities remain optimistic that its increased awareness and support of the Securities and Exchange Commission (SEC) will in no distant time yield the much awaited results.
Olutola Mobolurin, Chairman, Board of Directors of NASD Plc who presided the 6th Annual General Meeting of the Company last month noted that the SEC is supporting the market by providing the regulatory framework required to grow the fledgling OTC space.
The NASD Plc optimism over a brighter future comes despite that the year 2019 is seen holding its own challenges not just for the capital market but the country.
The company has started the 2019 financial year with strong momentum and clarity on what its needs to achieve.
In the capital markets, capital outflows in first-quarter (Q1) through to third-quarter (Q3) 2018 rocked the equities market, due to rising U.S yields and uncertainty regarding the elections. However, strong domestic participation in the OTC market ensured a 22.45percent return of the NASD in 2018, he noted further.
NASD had embarked on the reconfiguration of its proprietary Bilateral Interdealer Trading System (BITS) platform. Following the BITS platform which went live in April 2018, the transition has resulted in a significant reduction of the Company’s trading platform cost from N63million in 2017 to N1.4 million in 2018.
NASD formally launched its information repository, the NASD Enterprise Portal ( NASDEP) in April 2018 at an event which was well attended by various stakeholders including representatives of the Securities and Exchange Commission and has received significant interest till date.
In November 2018, NASD obtained the approval of the Securities and Exchange Commission of its Trade Guarantee Fund Rules and Penalties for Breaches of the Rules and Regulations of the OTC Market. It is expected that these Rules will further strengthen the Market and increase investors’ confidence.
“In many ways, 2018 was a watershed year for your company”, Bola Ajomale, Chief Executive
Officer/managing Director, NASD Plc told shareholders, adding that “By increasing our deployment of locally developed technology, we have also been able to significantly reduce our foreign exchange fluctuation risk while supporting the inevitable growth of Nigeria’s Fintech industry.”
He noted that activity in the review year was dominated by another driver – Fintech. “NASD embarked on a deliberate strategy of deploying a very focused investment in technology to achieve disproportionate fiscal and service delivery returns”.
“NASD OTC market currently only trades public securities that are registered with the Securities and Exchange Commission (SEC). We note however that some public securities are not registered at the SEC and therefore cannot trade on the OTC market. We shall continue to work with Corporate Affairs Commission (CAC) in identifying such Public companies and fully support the efforts of the Securities and Exchange Commission in ensuring all issuers of such securities comply with the law”, the CEO further said.
At the start of 2018 NASD successfully migrated its trading platform from the leased Nasdaq OMX platform to its proprietary Bilateral Inter-dealer Trading System (BITS).
“This fit for scale (and purpose) platform provided your company with increased ability to meet client demands and data integrity. Being a fully clouded system, we have empowered traders with access the OTC market from any smart device without geographical restriction. We released a second version of BITS later in 2018 that included enhancements and fixes requested by Participants”, Ajomale stated.
“The trading platform also gave NASD full determination over price making and market administration. For example; we expeditiously improved price discovery by changing from a last trade closing price mechanism to a more appropriate Value Weighted Average Pricing [VWAP] module. As NASD continues to evolve to a more accessible and liquid market, we will continue deploying relevant and focused technology to meet ever evolving market demands,” he added.
At the meeting, the shareholders received and adopted the Annual Report and Financial Statements for the year ended December 31, 2018.
Financial Performance
The company earned N134.4 million as trading commission in the year under review in comparison to N23.1 million achieved in the preceding year, representing 481.82percent increase over the preceding year’s performance.
This was due to increase in activities carried out by the respective Participating Institutions. From membership fees, the company earned N24.9 million and N57.7 million from interest on investments representing 1.6percent increase and 19percent decrease respectively over the previous year’s revenue of N24.5million and N71.2 million.
The marginal increase in membership fees for 2018 was largely due to nonrenewal of registration by some Participating Institutions and non-listing of new companies, while the decrease in interest income was due to the general fall of interest for a significant period of the year.
NASD direct trading expenses in the year under review stood at N1.4 million in comparison with N63 million in the preceding year, representing a decrease of 97.8percent.
This was as a result of the company’s transition from the trading platform leased from the Nigerian Stock Exchange to an alternative trading platform which has enabled the NASD align trading costs with the growth of activities in the market as promised last year.
Trade Activity review
Trading activity during the review year increased as the number of trades executed on the NASD OTC Market increased by 5.17percent over the preceding period.
The Market witnessed only a 5.40percent increased the number of admitted securities, 7.5percent increase in Authorised Traders and 1.55percent increase in Participating Institutions (PIS). NASD admitted 2 new securities; to close with 39 securities and traded bonds worth N57.87 billion.
The volume of shares traded during the year increased by 1867percent, while the value traded increased by 604.53percent compared to the previous year. As at December 31, 2018 the value of transactions executed on the market was N30.72 billion.
Overall market activity
The overall Unlisted Securities Index (USI) appreciated 19.7percent between January 2018 and December 2018 while Market Capitalisation rose by 21.8percent from N402.51billion in January 2018 to N514.77billion as at December 31, 2018. Although NASD had more trades in general, activity is still not evenly spread across all brokers.
Of the total of 129 Participating Institutions (PIS), 98 were active in 2018 and the 15 most active Institutions accounted for more than 90percent of deals and value traded. The Company believes that as more information is disseminated about the market, more Participating Institutions will become active for their investing clients.
Market development initiatives
The NASD data portal was the second portal deployed to enhance the visibility and transparency of the OTC market. “Observers of the market can visit www.dataex.nasdotc.ng to view market activity in real time for any of the traded securities once available. The portal also holds trading history dating back to market opening in 2013. On top of the trading platform and data portal we enabled SMS trade alerts and data feed API’S for data vendors. This has allowed us commence discussions with S&P and Refinitiv (formerly Thompson Reuters) to create a tradable index based on the best performing securities on the OTC market,” Ajomale stated.
He said a third technologyenabled initiative was to launch the NASD enterprise Portal (NASDEP). The portal opens up the capital market to a new group of pre-ipo companies who are seeking to interact with a limited number of single (non-bank) financiers such as PE Firms and Asset Managers. It also widens the NASD OTC Securities Exchange community as other capital market professionals are able to register and advise on this portal. “Through NASDEP we will give growth companies the needed capital market support that may ensure their long-term sustainability and will ultimately increase the level of listings in the sub- Saharan region,” the CEO said.
