NSE opens electronic portal for buying, selling, settlement of rights
The Nigerian Stock Exchange has announced the commissioning of electronic portal or automation of Rights trading and settlement on the bourse.
According to the NSE, in a statement made available to Daily Times, with effect from May 8, 2017, shareholders would commence electronic buying and selling of rights “can sell subscription rights both efficiently and at fair prices”
A rights issue is an offer to existing shareholders to purchase additional shares in a company during the company’s issue of new shares. The invitation to existing shareholders is usually made in proportion to their existing holdings, allowing them to buy the newly issued shares at a fixed price, usually at a discount to market value of the shares, within a specific subscription period.
A rights issue is one of the ways by which a listed company can raise funds from its existing shareholders, and for electronic trading of rights, a unique security code, different from that of the underlying security will be assigned to the right.
Mr. Ade Bajomo, Executive Director, Market Operations and Technology, NSE said, “The automation of Rights trading and settlement in the Nigerian capital market will enhance price discovery as rights can now be traded and re-traded without settlement complexities. It will help eliminate operational challenges resulting from manual trading and cash settlement between counterparties, whilst simplifying counterparty trade reconciliation between the brokers, registrars and the NSE.”
Explaining the Rights trading and settlement process, Bajomo remarked that “for an investor to be eligible to participate in rights trading, he/she must have a CSCS account set up through a licensed Dealing Member firm of the Exchange. In addition, the investor must fund his/her broker with the consideration value, premium and transaction fees, prior to execution of his/her mandate.”
Prior to this automation, trading and settlement of rights, where an investor decides to sell on the floor of the Exchange, was done manually.
