As part of efforts to create more investment opportunities and deepen liquidity in the Nigerian Stock Market, the Securities and Exchange Commission, SEC, is strongly in support of introducing securities trading.
The Acting Director General of the SEC, Mary Uduk who disclosed this at a forum in Abuja, said the Commission already has existing rules on securities lending and expects capital market operators to take advantage of the opportunity.
SEC defines securities trading as the act of lending a stock, derivative or other security to an investor or firm based on the borrower’s collateral which could be cash, security or a letter of credit.
The SEC Acting Director General noted that securities lending would create trading activities such as short selling, hedging and arbitrage while the hedge funds can also be put to more profitable use in the Nigerian capital market.
“We have a framework which has been approved, however, … it is not being fully explored, what we want to do now is to see what restrictions we can remove and what enlightenments we can do to ensure that other necessary parties key into the rules.” Uduk said.
She also disclosed that the Commission is engaging with institutional investors including the National Pension Commission to enact standards that will enable institutions to lend their equities for trading purposes.
In her words, “there are many institutional and even some individual investors that sit on large pools of stocks which they do not trade actively.”
“A vibrant securities-lending market will provide liquidity to such stocks and earn some returns for both the lender and the borrower.” Uduk added.