New market structure drives growth in Nigeria’s stock exchange - CNBC Africa

New market structure drives growth in Nigeria’s stock exchange

Western Africa

by Dara Rhodes 0

Nigerian Stock Exchange

“We have brought in a lot of changes into the market which have enhanced liquidity. Last year September, we brought in market making and we can see the physical impact of market making. We had some changes in price structure and in the number of shares that can move the price,” Ade Bajomo, Executive Director, Operations and Technology told CNBC Africa.

This according to the NSE has put the exchange firmly on the path to becoming a sophisticated market where investors have access to several investment options.

“On 30 September, we actually brought in further enhancement into the entire market structure which we believe is more in line with our best stock leadership as far as our market goals and its more of adopting that thought leadership into what works within the context,” said Bajomo.

Concerns about how much liquidity will be provided for the market makers and the visible impact on the market were raised when the market makers initiative was initially introduced, however, those issues are being resolved.

“Prior to the 30 September, we had three sessions in our market, we had what we call the pre-open session, the continuous trading session and the close. The pre-open is where buyers and seller’s trade and the broker dealers will put in their interest, what they want to buy, and what they want to sell. Then, at the end of the pre-open, there’s an auction that determines the price and if you are going to continue trading and then there’s a close at 2.30pm,” he explained.

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In the new market structure however, two market makers sessions have been added in which the market makers look at the imbalances and bring in liquidity to close the imbalances. The change was also created to bring more transparency, accountability and visibility to the market.

“When we started some two, three years ago, the market was pretty depressed. The index was around the 20,000 mark and the CEO and I talked about what we need to do and we very quickly concluded that it’s not one thing that is going to bring the market up but a series of things which all have to be done,” Bajomo said.

According to Bajomo, derivatives will be introduced next year, so the study of what should be introduced first has already commenced.

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