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SEC Moves To Enhance CSDs’ Interconnectivity For Trading Efficiency

Nigeria Securities and Exchange Commission (SEC) has commenced moves towards the implementation of a framework to strengthen interconnectivity and interoperability among the Central Securities Depositories (CSDs) with a view to enhancing trading and settlement system efficiency in the nation’s bourse.

The Commission in a Notice titled: “Interoperability among Central Securities Depositories: Proposed Interoperability/FMI Link Framework”, stressed that interconnectivity among the CSDs would ensure investor protection, while aligning the operations in the market with international best practices.

In line with the market’s regulatory framework, the SEC stated that all the securities exchange and CSDs in the capital market were expected to establish a peer-to-peer link to facilitate interoperability with each other and put in place the required infrastructure, systems, processes and risk management for the effective operation of the interoperable arrangement.

According to the commission, the CSDs are also expected to allow for fair and open access to their services based on reasonable risk-related access requirements as well as have adequate reconciliation procedures to ensure that their respective records are accurate and current.

It clarified: “The Nigerian capital market has witnessed remarkable growth in the last few years in terms of size, market participants and tradable instruments.

“ This has impacted the market structure in terms of composition and interconnectedness. In the secondary market particularly, there are currently multiple trading platforms and Financial Market Infrastructures (FMIs) which provide comparative services in depository, trading, clearing and settlement activities.

“Consequently, interoperability arrangement has become necessary in order to enhance the efficiency of trading and settlement functions as well as align the market with international best practices”, the SEC added.

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