Understanding e-dividend payments, T+3, trade alert
A dividend is a payment made by a company to its shareholders. It is usually a distribution of profits from earnings of corporations.
When an organization registered a profit or surplus, the corporation is able to re-invest the profit in the business as retained earnings and where there is still surplus to share, it will then pay a percentage of the profit as a dividend to shareholders.
Dividends also comes as bonus shares, which is credited to the shareholders accounts. Such bonus shares are priced at the prevailing equity price and could be sold by the beneficiary to generate the monetary value.
Bonus shares and cash dividends are usually posted as slips and cheques respectively to the shareholders dedicated addresses before, but with market innovations, by the Securities D Exchange Commission (SEC) Nigeria , the process has been simplified through electronic process as it is now directly credited the shareholders bank account or CSCS account in terms of bonus shares.
A company can pay cash dividend and also issue bonus shares, in most cases companies prefer to pay cash dividend, hence issuing bonus shares helps to dilute its share value in the market and may eventually lead to share reconstruction to prune down value shares on issue.
E-Dividend payment
Prior to the commencement of dividend payment directly to investors’ bank accounts ,the Nigerian Inter bank Settlement Systems (NIBSS) was not a key player in dividend payment but active in settlement of inter bank transactions.
The Electronic dividend payment or e-Dividend, however brought the NIBSS to full capital market operations, as it becomes fully integrated with the registrar companies in the capital market to its electronic payment network.
This synergy facilitates seamless processing and payment of shareholders dividends and interest on Bonds, Shares and other investment through the Automated Clearing House.
To benefit from e-dividend one must register freely from his dedicated bank. The registration charge is currently borne by the sec, till the end of the 2017 financial year 31 December.
What is T+1, T+2, T+3, terms used in capital market?
T+3 is the number of days plus the transaction day, it takes to effect transaction on the exchange and receive payment.
On the issue of transaction circle, it goes beyond T+3. For emphasis, T+ 3 transaction is sacrosanct in equity market IN Nigeria that on the T, that is day of transaction, three working days,
Whenever one buys or sells a stock, bond, or mutual fund, there are two important dates of which to always be aware which are the transaction date and the settlement date.
The abbreviations T+1, T+2, and T+3 refer to the settlement dates of security transactions which occur on a transaction date plus one day, plus two days, and plus three days, respectively. ‘T’ is the transaction date.
However, in Nigeria’s capital market, T+3 is the settlement day. Director General, Securities and Exchange Commission (SEC) Nigeria , Mounir Gwaarzo, speaking recently on the impact of T+3 settlement said “This T+3, sometimes we don’t appreciate the good things we are doing, that the advanced markets have been operating since the 18th century, their settlement is T+3.
The SEC DG added that “As at today, the US market as developed as they are still practices T+3, it is just towards the end of the year that they are looking at T+2, which is settlement of transaction within two days of transaction.
According to him, Nigerian market is developing very fast, and as the Direct cash Settlement systems (DCS) takes effect and becomes fully operational, Nigeria will migrate to T+2 “ I don’t see why we can’t operate T+2”
CSCS commitment to T+3 settlements, trade alerts
THE Central Securities Clearing Systems, (CSCS) is a central security depository of the Nigerian capital market and has been involved in the regulation of the activities of the Nigerian capital market as a shares or equities depository institution.
General Manager, IT & Operations; Joseph Mekiliuwa, who spoke to Daily Times Nigeria on the impact of the share depository and T+3 on the market said, “On the issue of transaction circle, it goes beyond T+3. For emphasis, T+ 3 transaction is sacrosanct in equity market IN Nigeria that on the T, that is day of transaction, three working days,
According to him , the three working days, is called delivery versus payment in the market parlance , and during this period, shares will leave the account of the seller to the account of the buyer, money will also leave from the account of the broker who bought to the account of the broker who sold for onward transmission to his client.
DCS ensure direct payment of transaction funds to your account
In the wisdom of SEC, Mekiliuwa said “we all know that there may be one or two broker who may not want to transmit that money to his client, SEC now introduced, DCS, Direct cash settlement”
he said by introducing DSC, what the broker will do is that on T+3, when he receives the money, they will do some in-house transactions clearance and on T+4 they will now give the investor the money or by way of issuing out cheques.
SEC has now directed, go by direct cash settlement, which says that on T+3, instead of the broker getting the cash credit in his account, the investor get the money in his or her account directly.
Observing trade alert
The market regulators urge all investors to always monitor transition alert on dedicated phone numbers.
The CSCS general manager IT & operations said “That is why we want to encourage everyone to observe the trade alert, if the transaction is executed at about 2.30 pm in the afternoon, then you know that the processing will continue and it is on real time basis that clients are alerted.
But, if transaction occurred in the morning, within one hour, you will be alerted, if transaction occurs around the tail end of the day, within one hour, you will be alerted. The alert is to put you in the know that something has happened to your investment.
So, if you are not the person that mandated the transaction, then you will report to the Exchange, and that means, we will ensure that that broker unwinds what he has done.
When you mandate transition, always monitor alerts on your phones to make sure you get the messages from CSCS. There is no way transaction will occur today and you will not be alerted today, not the third day, not even the second day.
