The Benefits of the NSE New Market Structure

Proshare

Thursday, July 05, 2018 11:27 AM / InfoWARE Limited 

Finding that change is constant both in the economy and our environment, the exchange- Nigerian stock exchange is embarking on changes to its equities market structure. This is in order to create an optimal market design that facilitates improved market depth, liquidity provision, and price efficiency. 

These changes will create a level playing field for the market participant and give room for new trading strategies. Institutional and retail investors will now enjoy reduced execution cost whilst issuers will access cheaper cost of capital.

 Proshare Nigeria Pvt. Ltd.

The NSE New Market Structure 

Changes To The Market Structure

  • Changes to the existing daily price movement will be implemented to allow for a maximum daily price movement of 10% in either direction.
  • The newly introduced NSE ‘Official open/close price' will be established at the first order match of the day that satisfies the minimum trade quantity threshold.
  • Only the top of the order book will be displayed to market participants during auction periods.
  • Imbalance sessions will take place as part of the pre-open and pre-close session.
  • Participants will include agency traders and market makers can participate in all sessions with no prior view of the order book.
  • Minimum trade quantity is now implemented with at least one potential trade that meets the threshold.
  • The reference price will remain set to the previous close price for the whole of the trading day.
  • Theoretical Information(TOP/TOV) will be calculated but not published during the Pre Open and Closed Sessions, but from the beginning of the imbalance sessions till the end of the open and close auction.
  • Market Makers are no longer allowed to enter one-sided order except to address imbalances during imbalance session, during which market makers are allowed one-sided order entries.
  • Order book depth during the auction will no longer be visible to all market participants

The Benefits of having this new market structure as stated by the NSE is that; As a business or an individual as opposed to the old one, the following will be enjoyed:

  1. Market makers will be able to enhance liquidity and reduce imbalances
  2. The new market prices will reduce spreads
  3. This structure will dampen volatility around the open and close auctions and during continuous trading
  4. There are uniformity and more structure in the new market which creates more transparency.

 
Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.


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