Dear Oscar Onyeama,
Happy New Year and congratulations on your appointment to the exalted position of the CEO of the Nigerian Stock Exchange (NSE), an Exchange that is yet to fulfil its potentials!
Your appointment would appear to be a clear case of a round peg in a round hole.
I can only assume that you left the comfort of your position at the American Stock Exchange to join the NSE because you wanted a challenge, if this is the case, you’ve made the right choice as there are plenty of challenges ahead.
I am also sure that since the announcement was made you have been inundated with plenty of advice, both solicited and unsolicited. Permit me therefore to offer you another unsolicited advice on what I think you should focus on.
Your main goal should be to turn the NSE into a boring exchange i.e. an exchange that is known only for being a transparent, efficient, low cost, well regulated and innovative venue for the trading of shares and bonds, and capital raising. The NSE, as it is currently, is a 24-hour news cycle content provider, filled with sensational and racy news items - for all the wrong reasons.
So how do we create a boring NSE, am sure you have your ideas but permit me to add to your list the following:
Resist the siren call and clamour for demutualising the NSE as no clear cut convincing business case and/or strategic case has been made. It appears to be a case of since Singapore, Malaysia, the UK and the NYSE exchanges have demutualised, then it should be good. Until the capacity of the NSE to effectively regulate and police the market, a capacity which it clearly lacks is established in the market, resist it.
Develop the regulatory capacity of the NSE – The findings by the SEC on the NSE (published so far) confirms what was common knowledge - that the NSE lacked any form of regulatory or compliance capacity. It could neither regulate itself let alone the market. If the NSE is to fulfil its potentials, you must develop its ability to effectively self regulate the market, starting first with the necessary changes needed in-house.
Your experience at the AMEX will be very relevant here as it appears that the raising of capital requirement appears to be the only regulatory tool the NSE has.
Develop a strategy for the NSE – The NSE never had any strategy and if it did, it was to simply ensure that stock prices continued on an upward trend (as events have shown), defying the logic and reality of the market. Permit me to state that your strategy should include the following:
1. NSE as a trading hub for Sub Sahara Africa - Nigeria is probably the largest and most liquid market in this region; it should be the premier venue for liquidity and raising of capital in the region. Presently it is not and if care is not taken, companies with global ambitions seeking to raise capital will look to the JSE in South Africa. O&O Plc did this and others will follow suit.
2. Better deal investors – No exchange can survive without investors, retail and institutional. However, the NSE has, truth be told, encouraged, by its inaction, the defrauding of investors. You must continue to focus on building and improving investor confidence; and actively ensuring that the retail end of the market can be recalibrated using technology (relative to the critical mass) in delivering on this.
3. Improved access of investors to trading on the NSE – You should encourage increased participation of retail investors by developing a comprehensive retail investor strategy. This should include encouraging internet brokers using the example of T.D Waterhouse, the famous Canadian broker.
Improve the relationship between the NSE and the stockbroking community.
Transparency - Please run the NSE in an open and transparent manner. For too long the NSE has been run like a secret society. It needs to be run like a modern institution.
If you can succeed in some or all of the above you would have made your mark and succeeded in developing a world class exchange and a very boring one at that as well.
Adeyemi Johnson, author, is the CEO of OpenSpaces Compliance Consultants, partners to Proshare and providers of financial services regulation advisory services to financial services companies. All opinions on this page/site constitute Open Spaces’ best estimate/judgement as of this date and are subject to change without notice. Proshare Limited, its employees and analysts accept no liability for any loss arising from the use of this information. All enquiries should be directed to email@example.com firstname.lastname@example.org
About the Author: Prior to setting up OpenSpaces, Adeyemi Johnson held a number of senior compliance roles with UK based firms such as GTBank UK, Bank of Ireland Asset Management, KPMG UK Ltd, Investec Asset Management and AXA Investment Managers.