Handling Delays in Trade Transaction Settlement and Crediting


Tuesday, April 19, 2016 8:35PM /Proshare Markets

Stock trading in the Nigerian Capital Market has come a long way. While trading transactions cannot be completed without the proper completion of transaction life cycle (currently T+3) in terms of settlement of securities and cash, therefore one can easily concludes that transaction settlement is as old as stock trading.

Before the advent of the Central Securities Clearing Systems (CSCS) Plc, transaction cycle used to take an average of six months. This was reduced to four days (T+3) cycle after the creation of CSCS. This can be said to be one of the key achievements of the organization.

Sometimes in 2007, the Chairman of CSCS, Apostle Hayford Alile, said the Central Security Depository is working very hard to commence a T+1 transaction cycle, which would boost early delivery of transactions done in the secondary market segment. The market is still waiting for this to commence since the statement has been issued.

The experience of Mr. Olu, an investor, will help throw more light on why market regulators and operators need to work towards the commencement of T +1 transaction cycle. Mr. Olu gave a sell mandate to his brokers and the sell mandate was executed the next day. If T+1 were to be in operation, he should get credited the next day after the sell mandate was executed.

Mr. Olu did not get the sales proceeds until after a week despite the fact that he has already filled a form subscribing to the Direct Cash Settlement System that just kicked off in the market.

The commencement of the Direct Cash Settlement System (DCSS) was meant to take care of fraudulent transactions and activities in the market but has not taken into consideration the T+3 transaction cycle.

Market stakeholders, more importantly regulators and operators, needs to review the current T+3 approach and come up with how some of the processes can be harmonized since trading portals and other processes are now automated to enable the market achieve the T+1 transaction cycle.

Write to research@proshareng.com for more insight

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