The stock market has started arrangement to reduce trading settlement cycle by half, from four days to two days.

Divisional Head, Capital Markets, Nigerian Exchange (NGX), Jude Chiemeka, said the planned reduction was due to reforms and competition among exchanges in global financial markets.

He said NGX is working with the Central Securities Clearing System (CSCS) Plc and other stakeholders to reduce the settlement cycle from T+3 to T+1 over the next few years.

 According to him, the Exchange will continue to seek and explore the use of advanced technological tools such as Straight Through Processing (STP) of equity transactions to enhance transparency in the market.

Chiemeka spoke during the virtual NGX Retail Workshop themed; STP of Equity Transactions, organized in collaboration with Central Securities Clearing System (CSCS) Plc and United Capital in Lagos.

He explained that the equities market is constantly evolving and it is imperative that the Exchange keeps up with the latest trends and technologies to ensure it provides investors the best possible service.

STP is a mechanism that automates the processing of transactions of financial instruments and provides a means of electronically capturing and processing transactions from the point of first deal to final settlement, he said.

Citing how well STP worked in other climes, Chiemeka said STP,  launched in India last year, with a settlement cycle of 15 days, has a cycle of two days, thus putting the India capital market in the elite group of advanced markets of the world while adding that the NGX is working with the CSCS and other stakeholders to reduce the settlement cycle from T+3 to T+1 over the next few years.

“However, this initiative can be achieved with the use of technology such as STP and adopting the STP will help in increase market transparency, avoid costly duplication of work and manual intervention, reduction in risks and errors, faster data capturing, processing and reporting generation, increase the overall market efficiencies and volumes of trade make the market cost effective and provide effective “In view of this, NGX will continue to explore the use of advanced technological tools such as STPs to ensure that the investing public conduct their transactions in a more efficient and seamless manner,” Chiemeka said.

Giving insights on the benefits of STP, the Regional Head, Business Technology and Digital Innovation at CSCS, Tobe Nnadozie, said the mechanism would create seamless settlement for investors and help to get real time enterprise Know-Your-Customer (KYC) integration.

He added that even though the STP might be expensive, it will become cheaper in the long run.

Martha Ehizele, Digital Channels and Partnerships lead at United Capital Securities said the STP mechanism will help in bringing youths (especially those who are not investing) to the capital market.

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