SEC Issues Fresh Financial Market Framework For Dealers

The Securities and Exchange Commission has issued an Interoperability/Financial Markets Infrastructure Link Framework among Central Securities Depositories to enhance the efficiency of trading and settlement functions as well as align the market with international best practices.

This was stated by the Management of the Commission in Abuja.

Interoperability means the technical and/or legal compatibility that enables a system or mechanism to be used in conjunction with other systems or mechanisms.

According to the Commission, 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 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 Commission stated that it is in this regard and the need to ensure the efficiency of the market and the protection of investors that the framework is being issued.

It said, “This framework is being issued in line with the mandate of the Commission to regulate the capital market with the objective of ensuring protection of investors, maintaining fair and efficient market as well as reduction of potential systemic risks in trading, clearing and settlement ecosystem.

In this regard, the Commission states that all Securities Exchanges and Central Securities Depositories are required to take necessary steps to put in place requisite infrastructure and systems for implementation of the framework, including any amendments to the relevant rules and regulations; bring to the attention of their members and participants the provisions of this framework as well as publish the same on their websites.

As part of the interoperability requirements CSDs are expected to stablish 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.

They must also allow for fair and open access to their services based on reasonable risk related access requirements; and have adequate reconciliation procedures to ensure that their respective records are accurate and current.

The Commission said the interoperable arrangement shall allow investors and participants settle fixed income securities on a beneficial ownership basis through any CSD in which they maintain CSD account(s) irrespective of the Issuer CSD in which the securities are domiciled and/or the investor CSD account of the counterparty.