NASD OTC market takes off in weeks as banks, CSCS sign pact

The NASD over-the-counter (OTC) market which has been on a test run since February is getting closer to its official take-off as six banks –Access Bank Plc, Guaranty Trust Bank Plc, Sterling Bank Plc, First Bank, Stanbic IBTC Bank, and UBA Plc – will now work directly with registered NASD plc market operators to ensure prompt settlement of transactions on the OTC market.

The market will officially be launched on July 1, 2013 following the signing of agreement on Monday between NASD Plc, Central Securities Clearing System (CSCS) and these settlement banks.

NASD Plc is the promoter of the trading network that 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 banks that NASD plc sent out request for proposal (RFP) for this role of settling trading, estimated about N10 billion monthly, approximately a N120 billion annual turnover, a couple of them accepted while some did not.

“All these six banks have the technology to drive the needed efficiency in this market. In the process of selection, we looked at the banks technology, back-up technology, and understanding of the capital market. What this lends to the market is a lot more safety, transparency, and efficiency. The banks would settle trading on behalf of the registered stockbrokers they signed-on. We are operating in a different market with a different model”. Bola Ajomale, managing director, NASD plc, told BusinessDay at the event that only one out of the six banks is settling trading of about 40 stockbrokers out of 100 stockbrokers.

Access to trade on this segment of the market is restricted to accredited broker firms who are duly licensed by the Securities and Exchange Commission (SEC). Clearing is provided by the Central Securities Clearing System while settlement is done through the six select banks.

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 had told BusinessDay that “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).”

“We will see more transactions between now and July 1 when we will launch the market. 200 plcs are in our radar now. As we talk to every stakeholder in this market, we think that our first port of call is to get them buy into the market which is very efficient and transparent,” Ajomale said.

Chike Nwanze, vice chairman, NASD Plc, said at the signing ceremony in Lagos that the NASD platform has come at a time when more transparency and integrity in the OTC securities market is required, adding, “Today marks a major milestone in the NASD OTC market and indeed the Nigerian capital market.”