To address the ongoing reforms and competition among global financial market exchanges, Nigerian Exchange Limited (NGX) has disclosed its partnership with the Central Securities Clearing System (CSCS) Plc and other key players to shorten the settlement cycle from T+3 to T+1 over the coming years.
The settlement cycle refers to a calendar that determines when purchase and sale transactions conducted on T Day (transaction day) are settled on a T+3 days basis
Additionally, NGX has announced its commitment to exploring advanced technological tools, such as Straight Through Processing (STP) of equity transactions, to enhance transparency in the Nigerian capital market (NCM).
During the virtual NGX Retail Workshop with the theme ‘STP of Equity Transactions’, organized in collaboration with CSCS and United Capital in Lagos, Jude Chiemeka, the divisional head of Capital Markets at NGX, affirmed the need for the exchange to keep pace with the evolving equities market by adopting the latest trends and technologies that offer investors the best possible service.
According to Chiemeka, STP is a mechanism that automates the end-to-end processing of financial instrument transactions and enables the electronic capture and processing of transactions from the initial deal to final settlement.
Drawing on successful implementations of STP in other countries, Chiemeka cited India as an example, stating that after launching STP with a settlement cycle of 15 days, the country has now reduced its cycle to 2 days, placing the Indian capital market among the elite group of advanced markets worldwide.
He further confirmed that NGX is diligently working with CSCS and other stakeholders to decrease the settlement cycle from T+3 to T+1 in the next few years, emphasizing that this endeavor can be accomplished through the utilization of technology such as STP.
“In light of this, NGX will continue to explore advanced technological tools such as STPs to ensure that the investing public can conduct their transactions in a more efficient and seamless manner,” he added.
Tobe Nnadozie, the Regional Head of Business Technology and Digital Innovation at CSCS, remarked that the mechanism will facilitate seamless settlement for investors and enable real-time enterprise Know-Your-Customer (KYC) integration. Nnadozie added that although STP might be costly at present, it will become more affordable in the long run.
Martha Ehizele, Digital Channels and Partnerships Lead at United Capital Securities, highlighted the significance of the STP mechanism in attracting young individuals, especially those who are not investing, to participate in the capital market.
Hari Chaitanya, Head of Investor Service Product Management, Transactional Products and Services at Standard Bank Group, emphasized the quickness and ease of access to a wide range of products provided by STP, as well as its ability to mitigate risks and reduce operating costs in the market.