Stanbic IBTC Stockbrokers, ABSA Securities Nigeria Limited and Cardinalstone Securities topped the Nigerian Stock Exchange (NSE) list of best stockbrokers by the value of year-to-date transactions.
The three brokers leveraged their exposure to institutional investors to outshine the other 182 registered brokers to post a combined trade value of N152.78 billion, accounting for 54.37 percent of the N281.02 billion recorded by the top 10.
According to stock market analysts, the brokers attracted the reported value of transactions because of their track records, which increased institutional investors’ confidence in the brokers’ ability to aid good delivery.
BusinessDay analysed the NSE Broker Performance Report for the period between January 1 and March 19, 2021. From the report, 20 stockbrokers repeatedly made appearances on the weekly NSE list of top 10 brokers. The brokers processed 30.28 billion units of stock in the review period and were worth N333.75 billion.
Out of the 20 brokers that at least appeared once on the NSE top list, 10 reported transaction value that was 81 percent higher than their peers, a performance that secured them a seat on the BusinessDay’s year-to-date NSE top 10 brokers, as analysed from the 10 weeks data on NSE website.
“For brokers in the top 10, they deal more with institutional clients, that is the main driver,” Ayorinde Akinloye, investment research analyst at United Capital, said.
Other stockbrokers that topped the gainers’ chart on the BusinessDay list of NSE top 10 brokers by the value of transaction include Rencap Securities (Nig) Limited, EFG Hermes Nigeria Limited, Meristem Stockbrokers Limited, and Apel Asset Limited as they recorded stock transaction that was valued at N30.28 billion, N27.58 billion, N18.37 billion and N15.38 billion, respectively.
With transaction value that was worth N13.66 billion, N12 billion and N10.97 billion, Cordros Securities Limited, RMB Nigeria Stockbrokers and Imperial Asset Managers, respectively, made the BusinessDay list of NSE top 10.
The intrinsic company shares that the stockbrokers traded were another reason responsible for their top performance, Henry Ogbuaku, group head, Asset Management, GDL, said.
“For example, if a stockbroker traded 1 million units of Dangote at N220 per share, the value will be higher compared to another that has done 20 million units of, say, Lasaco Insurance,” Ogbuaku noted.
It depends on the shares that the brokers traded, he said.
Even though Stanbic IBTC Stockbrokers attracted the most value of transaction worth N74.18 billion (22.26% of the total value reported by the top brokers), it only recorded a transaction volume of 12 percent of the 30.28 billion that was reported for the top performance by volume of transactions.
ABSA Securities and Cardinalstone Securities both managed stock transactions that were worth N41.12 billion (12.32%) and N37.48 billion (11.23%), respectively.
A brokerage company buys and sells orders submitted by investors. Its main duty is to act as a middleman that connects buyers and sellers to facilitate a transaction. Brokerage companies typically receive compensation using commission (either a flat fee or a percentage of the amount of the transaction) once the transaction has been completed.
Analysis of the NSE brokers report showed that while some brokers made it to the list of top players by the large volume of transactions, they were unable to make the list of top transactions by value.
“The brokers that topped by volume and are not in the top by value are more retail-focused. Given the characteristics of domestic investors, they tend to buy lots of lower-priced stocks compared to highly-priced ones,” a broker at one of the top 10 by volume who asked not to be identified, said.
Institutional investors who are mostly abroad are responsible for the purchase of most of the high priced stock, and they usually use the services of some of the top NSE stockbrokers, a Lagos-based market analyst said.
An institutional investor is an entity that pools money to purchase securities, and other investment assets. Institutional investors include banks, credit unions, insurance companies, pension funds, hedge funds, REITs, investment advisors, endowments, and mutual funds.
Stockbrokers’ importance to investors
Stockbrokers play an important role in equities market trading as they serve as agents between investors and the stock market.
According to market analyst, the most important advantage of the equity market is the diversification of investment, and with the help of clear research and expert guidance from stockbrokers, equity investment is safer and easier.
The equity cannot be bought unless a company issue shares on public notification. Some companies issue shares only through the broking system. Companies sell their shares through a brokerage system to small brokers who then sell their shares to the public in a trading account.
Stockbrokers in Nigeria are licensed for their important role by the Securities and Exchange Commission (SEC), which also regulates their operation. They are expected to operate within the ambit of the market procedures and rules, provided in the relevant laws and regulations. In this context, infringement of rules of the market, including abuses of customers’ accounts or transactions, are often appropriately sanctioned.
Quality over cost
Even though stockbrokers charge a fee for offering among other services, taking and executing orders from investors, rendering advisory service, and fund management service, Enrich Financial Group, an India-based investment company believes an investor/trader should concentrate on the facilities and the quality of the services provided by the broker on priority than the price or charges.
According to analysts, hiring the services of a stockbroking firm provides a high chance of achieving high return on investment than when such investors personally approach the market.
For example, personally running of investing portfolio by an investor is possible but there are benefits to using expert advice and support. As market analysts say, every trade has some ‘insider information’ that only insiders can be on top of. And stockbrokers are core-insiders.
Stockbrokers can give market tips and investment alerts, and according to analysts, these can be very valuable in achieving investment objectives. While it’s not the duty of a stockbroker to provide investors with information or to arrange investment lessons for them, with investors’ interest, a stockbroker, because he values the investors’ patronage, will likely do everything possible to support them.
Oftentimes, stockbrokers are also willing to give investors broader financial advice that goes beyond simply investing. One way that different brokerage companies try to distinguish themselves from their competitors is through their customer service.
“For an equities market like the one in Nigeria, the services of a broker is needed to achieve the set investment goals”, a Lagos-based market analyst said.
Meanwhile, Nigeria’s equities market was on red on Friday (2 PM WAT), down by 0.21 percent as investors traded shares from across the board. The NSE All-Share Index and market capitalization dropped by 82.30basis points to 39,210.65 after opening with 39,291.89.
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