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NGX says working with stakeholders to reduce settlement cycle

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The Nigerian Exchange Limited (NGX) has said that it is working with the Central Securities Clearing System (CSCS) Plc and other stakeholders to reduce the settlement cycle from T+3 to T+1 over the next few years. This comes due to the current reforms and competition among exchanges in global financial markets.

This was even as the Exchange said it will continue to seek and explore the use of advanced technological tools such as Straight Through Processing (STP) of equity transactions to enhance transparency in the Nigerian capital market (NCM).

Jude Chiemeka, Divisional Head, Capital Markets, NGX stated this during the virtual NGX Retail Workshop themed; STP of Equity Transactions, organized in collaboration with Central Securities Clearing System (CSCS) Plc and United Capital in Lagos.

Chiemeka, while commending CSCS and United Capital, explained that the equities market is constantly evolving and it is imperative that the Exchange keep up with the latest trends and technologies to ensure that as a platform provider, it provides investors the best possible service.

According to him, STP is a mechanism that automates the end-to-end processing of transactions of financial instruments and also provides a means of electronically capturing and processing transactions from the point of first deal to final settlement.

Read also: Equities market moves further north by 0.81%

Citing examples of how well STP worked in other climes, Chiemeka said that STP which was launched in India last year with a settlement cycle of 15 days, now has a cycle of 2 days, thus putting the India capital market in the elite group of advanced markets of the world while adding that the NGX is working assiduously with the CSCS and other stakeholders to reduce the settlement cycle from T+3 to T+1 over the next few years.

He said, “However, this initiative can be achieved with the use of technology such as STP and adopting the STP will help in increase market transparency, avoid costly duplication of work and manual intervention, reduction in risks and errors, faster data capturing, processing and reporting generation, increase the overall market efficiencies and volumes of trade make the market cost effective and provide effective regulation by systematic audit trail.

In view of this, NGX will continue to explore the use of advanced technological tools such as STPs to ensure that the investing public conduct their transactions in a more efficient and seamless manner”.

Giving insights on the benefits of STP, the Regional Head, Business Technology and Digital Innovation at CSCS, Tobe Nnadozie, said that the mechanism will create seamless settlement for investors and help to get real time enterprise Know-Your-Customer (KYC) integration. Nnadozie added that even though the STP might be expensive now, it will become cheaper in the long run.

For her part, Martha Ehizele, Digital Channels and Partnerships lead at United Capital Securities, the STP mechanism will help in bringing youths (especially those who are not investing) to the capital market.

Hari Chaitanya, Head, Investor Service Product Management, Transactional Products and Services at Standard Bank Group said the STP is quick and allows investors to have easier access to wide range of products, mitigate risks and reduces cost of operating in the market.