Capital market goes on full lockdown over Coronavirus

  • NSE shuts trading floors
  • All applications, processing online
  • Extends regulatory deadlines

The primary and secondary segments of the capital market will from today operate on a full remote basis with all trading, applications, processing and other filings to be conducted electronically using dedicated channels.

The Nigerian Stock Exchange (NSE) will today shut its trading floors across the country and move all its trading and regulatory operations to electronic platforms. Securities and Exchange Commission (SEC) yesterday issued a circular directing all capital market operators to file all returns and applications through electronic channels while cancelling all physical meetings and functions.

As the pandemic Coronavirus continued to spread and several new cases confirmed in Nigeria, both SEC and NSE stated that the cancellation of physical transactions and meetings was in line with their mandates to protect the market and in line with national emergency.

They said adequate measures have been put in place to ensure that the capital market continued to operate without hindrance during the lockdown period.

SEC stated that Covid-19 has created a degree of uncertainty and anxiety worldwide, as governments and health experts attempt to curtail the proliferation of the virus noting that the World Health Organisation (WHO) had warned that given Africa’s fragile health systems, the threat posed by Covid-19 in the continent is considerable.

According to SEC, its regulatory response to Covid-19 is focused on ensuring the continuity of its operations, monitoring market functions and systemic risk, providing regulatory flexibility and guidance to issuers, trading platforms, capital market operators and other stakeholders impacted by Covid-19 and continuation of investor protection efforts and relevant enforcement actions.

Under the market-focused adjustments adopted by SEC as interim in response to the effects of Covid-19, filing of all applications, for the time being, shall be made electronically to dedicated email addresses, fresh applications for registration of capital market operators have been suspended until further notice while pending applications and requests by operators for update of information would be processed online and all returns shall be filed electronically through dedicated email addresses.

Also, SEC approved a 60-day extension, in the first instance for public companies and capital market operators to file their 2019 annual reports and first quarter 2020 reports. The first Capital Market Committee (CMC) meeting in 2020 scheduled to hold on April 23, 2020, and all other meetings have been postponed indefinitely.

“It is important to note that the foregoing guidelines are not exhaustive, but rather represent an outline of immediate actions the Commission considers necessary to sustain the actualisation of its regulatory mandate and maintain the integrity of the Nigerian capital market during this challenging period. Accordingly, the Commission will continue to issue updates to market stakeholders as appropriate. The Commission will also continue to closely coordinate with other financial regulators and governmental authorities,” SEC stated.

As the NSE shuts down its trading floors today, stockbrokers have allayed any fears of disruptions to trading activities noting that most stockbrokers had for several years been operating remote trading platforms.

Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Chief Onyenwechukwu Ezeagu, said stockbrokers are fully prepared for full remote trading noting that most stockbrokers have since the implementation of minimum operating standard (MOS) been trading remotely on real time basis either through X-GEN or FIX-Protocol.

“This has been part of business continuity plan (BCP) of the NSE and SEC for dealing member firms and this has been put in place since 2015. Consequently, the closure of the NSE trading floor will in no way adversely affect stockbrokers’ ability to trade on behalf of themselves and their clients. Over 90 per cent of all dealing member firms have information and communication technology (ICT) remote access capabilities,” Ezeagu said.

He pointed out that physical trading floors are becoming outdated giving way to virtual floors as technology has brought disruptive innovations in the way and manner businesses are carried on in this modern time.

Chief Executive Officer, Sofunix Investment and Communications Limited, Mr. Sola Oni, noted that remote trading by NSE dated back to over two decades as it had become part of the system after the commencement of Automated Trading System (ATS).

“Most stockbrokers have been trading remotely over the years. This explains why attendance is usually scanty on the Exchange. The current situation has no negative impact as many of the dealing member houses are already used to it,” Oni said.

On whether full remote trading will impact on volume and price discovery, Oni said remote trading is similar to trading on the floor and it will have no negative impact on volume and price discovery.

“The basic difference between remote trading and floor trading is physical presence and non-physical presence. Many years ago, some people suggested cancellation of trading floor but the Exchange maintained that it is important to encourage those who prefer to come to the floor as this enhances interaction. The floor also is symbolic. Both floor and remote traders use the same machines. The Exchange has come a long way in deployment of information technology for transaction. One can trade remotely from anywhere in the country and even outside the country,” Oni said.

The NSE had indicated that it would close all its trading floors with effect from today as part of a 30-day emergency response plan to the continuing spread of Covid-19.

Stockbrokers will however continue to trade using their remote platforms. The 30-day remote working plan will also see NSE’s staff working through various digital platforms.

The Exchange also granted a 60-day grace period for all companies to submit their audited report and accounts for the year ended December 31, 2019. Under the extant rules, these companies are required to submit their results not later than March 30, 2020. The 60-day grace period extends the deadline to May 29, 2020.

Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr Oscar Onyema, in a circular, said the remote working plan was in response to significant growth in new cases.

He explained that the 30-day remote working plan for NSE’s employees excluding essential staff will be activated today but in order to give dealing members enough notice, the NSE will from Wednesday, March 25, 2020 temporarily close all its trading floors.

He added that during this 30-day remote working plan, remote trading will continue and NSE staff will be available through all its digital platforms to provide support.

He explained that all physical meetings within and outside NSE’s office premises have been suspended until further notice while the Exchange has instructed its employees to leverage technological tools to conduct meetings virtually.

According to him, in line with the Exchange’s robust business continuity management framework, it had put in place measures to ensure its operations and trading activities continue seamlessly throughout this period.

“As an exchange, we will ensure that all relevant information continues to flow into the market to ensure the pricing of risk assets remains transparent and reliable across asset classes to allow investors to value their portfolios and make informed investment decisions under these volatile conditions,” Onyema said.

He noted that while the Coronavirus pandemic had come with an unanticipated human and economic crisis with businesses and capital markets significantly impacted, the Exchange has continued to operate during its normal trading days and hours pursuant to the activation of business continuity plans that affirm the resilience of the market.

He reaffirmed the commitment of the Exchange to providing an efficient market that allows investors access to liquidity even in the most trying of times.

“Dealing members are, therefore, encouraged to continue to trade remotely via our electronic platforms such as FIX protocol and XNET, and reach out to their compliance officer if any support is required. Please note that we will provide manual support to members without remote access during this period.

Issuers who have any business to conduct with the Exchange can reach out to their relationship manager for guidance. You should continue to submit all regulatory filings via Issuers’ Portal (X-Issuer). As the Exchange embraces social distancing as prescribed by Nigeria Centre for Disease Control (NCDC), we have further engaged with the Federal Government on issues of annual general meetings, maturing financial instruments, financial reporting, to mention a few and appropriate updates will be provided in due course,” Onyema said.

Head, Listings Regulation Department, Nigerian Stock Exchange (NSE), Godstime Iwenekhai said the 60-day extension of regulatory deadline for submission of results was in recognition of the fact that some of the internal governance, auditing and other procedures and processes of listed companies may have been disrupted by Covid-19.

“During this period, there will be no sanctions for companies that are unable to file the audited financial statement,” Iwenekhai said.

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