25 February 2013

Nigeria: Market Making - Liquidity Must Be Provided According to Principles - SEC

Securities and Exchange Commission has responded to calls for provision of liquidity to support market making, saying that such liquidity must be provided according to principles.

"The market's recent rally is generating calls for liquidity. The SEC recognizes that provision of liquidity should be done in a manner that is consistent with the principles spelt out in the guidelines and administered in a fashion that sustains the upswing while foreclosing the risk of contagion", the Commission said in a statement issued on Friday.

Meanwhile, it said that it would soon organize a workshop to enhance the capacity of its staff in preparation for margin trading.

According to the Commission, "The one - day intensive training is intended to strengthen the capacity of staff of the apex regulator of the Nigerian capital market on the range of issues which the list addresses. The training will flash - back to the issues that led to the melt down, the centrality of unregulated and unsupervised margin lending to the mix of causal factors( which led to the melt down) and how the new structures will limit the risk of margin transactions on capital market activity.

"The capacity - building workshop will also introduce participants to the value propositions which the Margin List holds for other capital market stakeholders such as notional size of the market for margin activity, implications for operators, impact on the NSE's data classifications, particularly as it relates to liquidity, and consequences for / impact on the NSEs basket of securities.

"The workshop will also define the various arms of the Commission that will use the analytics part of the Margin List application for the purpose of ensuring that surveillance activities are proactive rather than reactive. Participants will be introduced to a broad picture of the nature and role the interface between SEC, CBN, Banks, Market makers and high volume traders through the list. The workshop is being facilitated by Applied Logic Ltd., a business data company based in Abuja.

"It was in response to the challenge posed by margin lending that a financial services sectoral response witnessed the joint issuance of guidelines by the CBN and SEC in 2010 to define the space for margin activity.

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