Goddy Egene
27 November 2008
Lagos — The Securities and Exchange Commission (SEC) has confirmed that it has approved the applications of Greenwich Trust Limited, Chapel Hill Advisory Limited and Diamond Capital & Financial Market Limited as market makers.
Market makers are wholesale operators who ensure that there is liquidity in the stock market by either buying shares when there is a glut or selling shares when there is scarcity.
The decision to introduce them into the Nigerian capital market was reached last August as part of the recovery measures to stem the persistent fall in the share prices at the stock market.
SEC's Head of Media, Mr. Lanre Oloyi, had penultimate week disclosed that the Commission had begun the registration of market makers. He said the approval process of three out of the 15 applications, had reached advanced stage, promising to make the names available as soon as the final approval were granted.
Oloyi who, spoke to THISDAY on the telephone yesterday, said: "The Commission has approved Chapel Hill, Greenwich Trust Limited and Diamond Capital & Financial Market Limited as market makers. Other applications are still under consideration."
The news of the appointment was welcome by some operators who said it would help to boost the stability that is gradually returning to the market.
"Although the market is not as bad as it was a few weeks ago, the activities of the market makers would go a long way to stabilise the market more," a stockbroker said.
According to guidelines of SEC, a market maker shall be a company duly registered with Corporate Affairs Commission (CAC) and shall have a minimum paid-up capital of N2 billion.
They are required to at all times maintain sufficient liquid assets to cover its current indebtedness.
Obligations of the market maker include: stabilisation of the market by ensuring continuous liquidity by synchronising buy and sell transactions of a security; operate within the established transaction spread (that is bid/offer spread), which shall be a maximum limit of three per cent and subject to review from time to time.
Also, the market maker will have the capacity for continuous two-way quotes in the relevant stocks through the trading session in a minimum quote size of 100,000 units of shares and must have the capacity to deliver and settle transactions within the prescribed settlement cycle of T+3.
They must equally have the capacity to lend and borrow the designated securities at any time, with a view to ensuring stability in the market.
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