NCM 2020: Technology and the Nigerian Capital Market

Proshare

Monday, March 01, 2021   /05:00 AM / By Proshare Research/ Header Image Credit: EcoGraphics


 Proshare Nigeria Pvt. Ltd.  

 

Technology & The Capital Market

 

Technology Adoption

The adoption of new technology is not a fad but the tap root of the new asset trading outlook of the future. Investors are going to be less concerned with having face time with their equity and fixed income brokers as they would be concerned with the simmering impact of economic and sectoral business changes on corporate bottom lines or instrument yields. The information they desire must be timely, qualitative, and reliable. CMOs that cannot provide this service delivery quality, leveraging technology and data will soon find their doors shut, permanently.  Artificial Intelligence (AI) and Machine Learning (ML) are the new cogs of the spoke of asset brokerage services.


Going forward technology will constitute a bigger role in resolving clients credit requests and investment preferences places trading decisions in the hands of the customer rather than the so-called specialist. The specialist will still have roles to play but the power of near monopoly over the relevant data needed to make intelligent decisions will gradually disappear.


Technology will light a fire under the bed of CMO complacency and require traders and investment analysts to justify their incomes and ensure greater fidelity in their advisory role.


 Proshare Nigeria Pvt. Ltd.


Summary of the Online Trading Report

In the 2020 online trading report the authors noted that, "To be sure, local Nigerian financial markets are steadily rising to match global standards. Fintech companies are putting pressure on the brick-and-mortar paradigms of classic trading platforms and raising the performance bar for younger investors insisting on a different consumer journey from their forbears. Indeed, the new user of financial products is fixated with speed, governance, responsiveness, and accuracy. Capital Market Operators (CMOs) that cannot fit into the revised framework of client expectations have one choice, to fold up".

 

The prognosis might have seemed brutal, but it was factual and relevant. The realities of the new investor environment create a buying and selling protocol that is different from the past. The new market perspective involves the application of technology to a new type of investor, a new expectation of markets and a new set of regulatory requirements. The report further pointed out that, "The evolving capital market environment is gruellingly competitive and crushingly innovative, the time for genteel paper-pushing has ended and operating firms that do not rethink, reimagine and restrategize their businesses could kiss such businesses farewell as digital innovation becomes an ever more powerful force for change".

 

 In the report it was explained that "The outbreak of the coronavirus pandemic in late 2019 has made the case for remote business interface compelling. The report notes that the fixed income securities market is the largest and possibly the most attractive segment of financial trades. With the government increasing activity in the treasury bill and bonds market to cope with the challenges of widening budget gaps, the market for public treasury instruments has grown phenomenally over the last decade 2010-2020. While the Nigerian Stock Exchange (NSE) market capitalization rose from N11.48trn in 2014 to N12.96trn in 2019, reflecting a six-year growth rate of +12.89%, the bond market saw growth from N104trn in 2014 to N232.68trn in 2019, showing a much faster-paced six-year growth rate of +123.73%".

 

"Despite the faster growth in the fixed income market and the relatively larger size of government treasury trades, the digital market still favours equities. The report discovered that 72.90% of online trades are equity transactions, 14.18% mutual funds transactions (mainly equity), fixed income 5.29%, forex 2.19%, commodities 0.90% and others 3.35%. Investors appear be feel easier handling traditional equity businesses online than any other asset class. The limited nature of online trades means that the online market of asset trading in Nigeria is thin and narrow, thereby representing an opportunity".

 

"If traders educate their clients and show them how to make decent returns on trading different asset classes, the volume of traded online business would increase exponentially, and investor portfolio diversification would improve risk/return ratios. The online financial asset trading business appears constrained by a lack of strategic effort at getting investors to migrate to digital mobile trading platforms. The problem appears to be a lack of CMO-friendliness with digital technology and constraining 'muscle memory' that compel CMOs to revert to the comfortable and familiar. Fintech companies are, however, shaking things up".

 

"COVID-19 may have wobbled CMO perceptions and their operating preferences as remote interaction increasingly becomes the new normal, with clients increasingly expressing a preference for transaction journeys that reduce a human interface. Gen-Zers would want the customer experience to be plugged into a mobile digital journey like their daily consumer retail transactions. To improve digital online trading, CMOs will need to rethink their service-delivery buckets and drive more business to digital platforms".

 

The data research behind the report peeled the onion skins from market perception to show the following statistical results:


On reviewing the outcome of the 2020 survey that received 785 responses, the top five fastest online platforms were:

  • Meritrade
  • Codros TradeButton
  • Investment-One EasyTrade
  • MyTradeBook, and
  •  InvestNow

 

These platforms, according to the survey, provide investors with the fastest trading journeys but most of the experience relates to equity trades. What informs the choice of online trading platforms? The survey result suggests that users of online platforms made choices based on the following considerations:

  • Easy trade execution (44.44%)
  • Quality of Research & Reports (11.89%)
  • Asset Recommendations (11.50%)
  • Referrals by friends (11.24%)
  • Corporate self-promotion (5.94%)
  • Market data search (1.42%)
  • Others (5.04%)

 

The consumer experience journey has shown that financial sector clients continue to discriminate amongst online service providers for the following key reasons:

  • Market/Company Analysis and Reports (42.71%)
  • Platform Trading Tools (32.00%)
  • Diversity of Assets Tradeable (11.61%)
  • Low Commissions (8.90%)
  • Others (4.77%)

 

S0 where do online clients desire to see improvement in service delivery experience? The research survey suggests that the most significant areas of online service improvement required by clients are in the following areas:

  • Research Reports (26.14%)
  •  Other Tradeable Assets Apart From Equities (23.92%)
  • Lower Service Commissions (20.39%)
  • Better Trading Tools (14.51%)
  • Lower Initial Deposits (7.06%)
  • Others (7.97%)

 

The survey covers other areas of importance to retail and wholesale customers, building a body of information of strategic importance to CMOs who would need to Rethink, Reimagine and Restructure platform operations in a way that feeds into a product and process value chain that fully recognizes the needs and wants of younger demography of investors.

 

The report for 2021 intends to upgrade its 2020 counterpart to dive deeper into the relative digital performances of CMOs. It would also review the buy-in of generation Y and Z investors and dissect their user experiences, interfaces, and expectations.

 

New Trends

With a younger profile of investors dependent on internet access and information, investor expectation has shifted to and amongst a younger demography. Investors among the new generation of Nigerians are quick to make global comparisons of returns and risks on the fly at the flick of a button. 


This will mean that CMOs will have to scaleup their service point responses and improve their communication with customers using cutting-edge Artificial Intelligence (AI) software. In addition, the broad and speedy access of clients to market information across global jurisdictions suggests that more investors would want to trade assets across countries.

 

The latter point might prove tricky as the SEC has not yet provided a framework within which Nigerians resident in Nigeria can trade (buy or sell) equity in companies listed on foreign trading floors such as the New York Stock Exchange (NYSE), Chicago Board of Exchange (CBOE), NASDQ, or the London Stock Exchange (LSE). With investors wanting to take advantage of global opportunities CMOs and regulators will come under increasing pressure in 2021 to allow local Nigerian clients trade in foreign equities. The recent challenges faced by fintech companies like Chaka with the SEC underscores the conflicts and opportunities in cross-jurisdictional trading. 


Do feel free to share your opinions/observations and feedback with us vide content@proshareng.com and/or research@proshareng.com 


Watch Video

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd. 


Downloadable PDF - The 2020 Nigerian Capital Market Report

1.       Complete Report: The Nigerian Capital Market Report 2020: Leveraging a Crisis - Jan 28, 2021

2.       Executive SummaryThe Nigerian Capital Market Report 2020: Leveraging a Crisis - Jan 28, 2021

 

Proshare Nigeria Pvt. Ltd.


Related Links

1.      NCM 2020: Regulatory Governance in 2020

2.     NCM 2020: Energy Commodities Took a Big Hit in 2020

3.     NCM 2020: Bond Funds Grew By 443.80% YoY in 2020

4.     NCM 2020: Lower FX Earnings Widened the Gap Between Two Markets

5.     NCM 2020: FGN Eurobond Was Driven by Movement in Oil Prices and COVID-19 Pandemic

6.     NCM 2020: Treasury Bills Fell to a Record Lows in 2020

7.     NCM 2020: Yields in the Fixed Income Market Took a Downward Trajectory in 2020

8.     NCM 2020: Top Ten Moments in the Nigerian Capital Market in 2020

9.     NCM 2020: NASD USI Closed Green in 8 Out of 12 Months in 2020

10.  NCM 2020: Extracts of Financials of Quoted companies - DANGCEM Tops on Revenue and PAT

11.   NCM 2020: Agriculture Sector - OKOMUOIL Tops on EPS and PAT Margin

12.  NCM 2020: Healthcare Sector - NEIMETH Tops on ROE and PAT Margin

13.  NCM 2020: Industrial Goods Sector - DANGCEM Tops on EPS as BUACEMENT Tops on PE Ratio

14.  NCM 2020: Oil and Gas Sector - TOTAL Tops on PE Ratio as JAPAULOIL Tops on PAT Margin

15.  NCM 2020: Consumer Goods Sector - NESTLE Tops on EPS as DANGSUGAR Tops on PAT Margin

16.  NCM 2020: Financial Services Sector - NESF and STANBIC Top on EPS

17.  NCM 2020: Sectoral Market Capitalisations: Oil and Gas Records - 20.62% Decline in 2020

18.  NCM 2020: A Review of Gote and Toni Indices in 2020

19.  NCM 2020: NSE Records 1 New Listing to 5 Delistings in 2020

20. NCM 2020: Growth of Securities Listed on NSE - Total Securities Listed Increased by 0.55%

21.  NCM 2020: 23% of Listed Companies on NSE on Pause in 2020

22. NCM 2020: 84 Stocks Are Off 52-Week Highs as 85 Near 52-Week Lows

23. NCM 2020: Forty-one Financial Services Stocks Are Penny Stocks in 2020

24. NCM 2020: NSEASI Performance Review and How Each Company Fared in 2020

25. NCM 2020: Market Records 57 Gainers to 66 Losers in 2020

26. NCM 2020: Foreign Portfolio Participation in Equity Trading Dropped from March to November 2020

27. NCM 2020: Trading Statistics in 2020 - Market Volume Increased by 21.69%

28. NCM 2020: NSE Market CAP Closed at US$55bn Below the Peak of US$84bn Recorded in 2013

29. NCM 2020: NSEASI Closed Green in 9 Out of 12 Months in 2020

30. NCM 2020: Markets Were Volatile Globally in Year 2020 as COVID-19 Pandemic Induced Uncertainty

31.  The Nigerian Capital Market Report 2020: Leveraging a Crisis


Proshare Nigeria Pvt. Ltd.


Monthly NCM

1.      The November 2020 Nigerian Capital Market Service Report - Proshare

2.     The October 2020 Nigerian Capital Market Service Report - Proshare

3.     The September 2020 Nigerian Capital Market Service Report - Proshare

4.     The August 2020 Nigerian Capital Market Service Report - Proshare

5.     The July 2020 Nigerian Capital Market Service Report - Proshare

6.     The June 2020 Nigerian Capital Market Service Report - Proshare

7.     The May 2020 Nigerian Capital Market Service Report - Proshare

8.     The April 2020 Nigerian Capital Market Service Report - Proshare

9.     The March 2020 Nigerian Capital Market Service Report - Proshare

10.  The February 2020 Nigerian Capital Market Service Report - Proshare

11.   The January 2020 Nigerian Capital Market Service Report - Proshare

12.  The November 2019 Nigerian Capital Market Service Report - Proshare

13.  The October 2019 Nigerian Capital Market Service Report - Proshare

14.  The September 2019 Nigerian Capital Market Service Report - Proshare

15.  The August 2019 Nigerian Capital Market Service Report - Proshare

16.  The July 2019 Nigerian Capital Market Service Report - Proshare

17.  The June 2019 Nigerian Capital Market Service Report - Proshare

18.  The May 2019 Nigerian Capital Market Service Report - Proshare

19.  The April 2019 Nigerian Capital Market Service Report - Proshare

20. The March 2019 Nigerian Capital Market Service Report - Proshare

21.  The February 2019 Nigerian Capital Market Service Report - Proshare

22. The January 2019 Nigerian Capital Market Service Report - Proshare


 Proshare Nigeria Pvt. Ltd.


Annual Reviews & Outlooks

1.        NCM2020 - Fin. MKT in Transition: Understanding Past Uncertainties; Preparing for New Possibilities

2.        Surviving Uncertain Times in the Nigerian Financial Market

 

 Proshare Nigeria Pvt. Ltd.


Special Reports & Publications

1.      NSE Ten Years After a Takeover: The Good, The Bad and Undecided

2.     NSE Post Takeover: A Journey Through Time

3.     NSE Post Takeover: The Story of Then and How

4.     NSE Post Takeover: Market as a Metaphor

5.     NSE Post Takeover: The Imperatives of Tomorrow: Myths, Risks and Opportunities

6.     NSE Post Takeover: Power Moves -Demutualization and The New Board Games

7.     NSE Post Takeover: A Whole New World-Reimagining Endless Possibilities

8.     NSE Post Takeover: Back of the Envelope


 Proshare Nigeria Pvt. Ltd.


Online Trading Reports

1.      Online Trading Ranking Report 2020 - Trading in a Period of a Virus; Building Good Habits

2.     Online Trading Ranking Report 2019 - Refining The User Experience; Trends In Digital Trading

3.     Nigerian Online Trading Portals Ranking Report 2018

4.     Nigerian Capital Market and FX Online Trading Portals Ranking Report H2 2017

5.     The Nigerian Capital Market Online Trading Portals Ranking Report

6.     The Nigerian Online Trading Report


 Proshare Nigeria Pvt. Ltd.


CMO Reports

1.        Nigerian Equity Market Outlook: COVID Out, Riots In?

2.        Nigerian Economic and Financial Markets: H1:2020 Review and H2:2020 Outlook Opportunity in a Crisis?

3.        Nigeria Economic Outlook 2021: A Shot at Recovery

4.        2021 Outlook - Is The Tunnel Getting Darker or Brighter

5.        Nigeria in 2021: Positioning in the New Normal

6.        Nigeria 2021 Outlook - Navigating Unsteady Terrain

7.        Nigeria FY 2021 Macroeconomic Outlook - A Break in the Clouds

8.        Nigeria 2021 Outlook: COVID-19 Recession and the Long Road to Economic Recovery


 Proshare Nigeria Pvt. Ltd.


Selected Articles

1.     The Year 2020 in Retrospect: A Bleak Year for Households

2.     Will Gold Prices Rally in 2021? Here are Its Ebbs and Flows

3.     Review of 2020 Activities In The Islamic Finance Market And The Outlook For 2021

4.     Ranking Global Equity Markets in 2020: NASDAQ Takes The Lead

5.     Holiday Blues Dampen Trading Activities for Last Trading Session

6.     2021:President Buhari Reaffirms Commitment To A United And Progressive Nigeria

7.     Ten Most Capitalised Stocks Account for 83% Contribution to the NSEASI

8.     Proshare's New Year Message - Change, Technology, and The New Corporate Calling


 Proshare Nigeria Pvt. Ltd.


News Posts Referenced in the Report

1.     NSE Revolutionises Public Offerings Subscription with Electronic Platform

2.     Finally, NSE Launches the Growth Board with FintechNGR as a Strategic Partner

3.     NSE Migrates      Four Companies from ASeM to Growth Board

4.     Demutualisation: NSE Announces Chief Executives for Emerging Entities

5.     NSE Members Assent to Demutualisation Resolutions at COM and EGM

6.     COVID-19: NSE Activates 30-day Remote Work Plan; Remote Trading to Continue

7.     FGN 14 Day Restriction: NSE to Sustain Remote Trading Amidst COVID-19 Pandemic

8.     CAC Issues Guidelines on Holding of AGMs of Public Companies Using Proxies

9.      COVID-19 and AGM by Proxy: Lessons from GTBank Approach

10.  Revision of Stamp Duty on NSE Transactions to 0.08% from 0.075% Effective 7th December 2020

11.  HM Zainab Shamsuna Ahmed Urges IST to Discharge Duties Diligently

12.  NSE to Re-Introduce Trading Fees for Securities Traded on the Fixed Income Market



Proshare Nigeria Pvt. Ltd.

 Proshare Nigeria Pvt. Ltd.

 

 

READ MORE:
Related News
SCROLL TO TOP