NGX relaunches market making programme to deepen liquidity

The Nigerian Exchange (NGX) Ltd has announced the relaunch of its market making programme aimed at deepening liquidity effective Oct. 4.

The Chief Executive Officer, NGX, Mr Temi Popoola, disclosed in a statement made available to our reporter on Thursday in Lagos.

Popoola said the relaunch followed the review of its rules to provide the flexibility to implement diverse market making programmes across all asset classes listed on the exchange, as approved by the Securities and Exchange Commission (SEC).

He said that market making occurs when a trading license holder provides continuous two-way quotes, both buy or sell prices, to the market on selected securities during the trading day.

“Essentially, market makers display the amount they are willing to buy or sell a security and the guaranteed number of units and once they receive an order from a buyer, they sell off from their own inventory, ensuring that the order is completed,” Popoola said.

He listed the NGX market makers across its product classes as; ABSA Securities Nigeria, CSL Stockbrokers, Vetiva Securities, Stanbic IBTC Securities, Chapel Hill Denham Securities, FBN Quest Securities and United Capital Securities.

“At NGX, we are committed to tackling liquidity constraints and ensuring sustained flow of funds in the capital market.

“We recognise the importance of liquidity as a driver of participation in our market and are confident that market making will ease the barrier of entry and exit, whilst providing a measure of control over volatile price fluctuations.

“As we continue to consider ways to maximise opportunities across our value chain, our goal is to evolve with the increasingly sophisticated needs of our stakeholders and market making is just one of the strategies we will deploy in this regard.

“We also wish to thank the SEC and the Central Securities Clearing System for their contribution toward the relaunch of the programme,” he said.

Also speaking, NGX Divisional Head, Trading Business, Mr Jude Chiemeka, said the relaunch of the initiative would boost market liquidity.

Chiemeka noted that the benefits to be reaped from market making cut across the spectrum of our market.

“For the market makers, they can expect enhanced revenue opportunities as well as reduced transaction and regulatory fees in recognition of the responsibility and risks they have taken on.

“There are also the benefits of increased liquidity, greater market depth, enhanced portfolio diversification, and more, that other capital market players will enjoy.

“To ensure that the market indeed reaps the benefits, we have been painstaking in our selection of market akers and we encourage investors to leverage the opportunities they bring to the table,” he added.

It was reported that NGX first launched the market making programme in 2012, in an effort to improve liquidity and increase efficiency across asset classes.

The relaunch takes into consideration the evolving needs of stakeholders and will allow for periodic adjustments to meet the objectives of the programme.