Leadership (Abuja)

Nigeria: NSE Introduces Market Quality Report

The Nigerian Stock Exchange (NSE) has launched the NSE Market Quality Report (X-Qual).

The Exchange became the first Capital Market Operator in Africa to achieve the feat. The NSE Market Quality Report was introduced to key stakeholders at the just concluded Nigerian Capital Market Committee Retreat and Conference in Warri, Delta State.

The Chief Executive Officer of The Nigerian Stock Exchange, Mr Oscar Onyema, disclosed at the Annual Conference that The NSE Market Quality Report was designed to disclose the extent to which equities traded at the Exchange provide executions at prices better than the prevailing price quotes before an investor places an order. "The information will no doubt enable analytical investors or broker-dealers gain a better understanding of how best to execute orders in the market and the quality of execution they can expect for the different stocks being traded", he said.

He added that the report include information about the Exchange's quality of executions on a stock-by-stock basis, including how orders of various sizes are executed relative to the available price quotes. The report also discloses information about effective spreads (the spreads actually paid by investors when their orders are executed), realised spreads (shows whether the liquidity providers for a trade subsequently have the price move in their favour after the trade), fill rates (the likelihood of executions to occur), and execution speed (time taken to execute orders).

He explained that Nigeria has no rules governing the disclosure of order execution and routing practices but in developed markets, there are rules that require and govern such disclosures. For instance, the US SEC adopted two rules to improve public disclosure of order execution and routing practices.

These are Rule 605 and Rule 606; the former makes a requirement for electronic reports from Market Centres which include uniform statistical measures of execution quality to be made available to the public on a monthly basis while the latter requires all broker-dealers routing orders in equity and option securities make available quarterly reports that present a general overview of their routing practices.

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