Central Securities
Clearing System
Presentation On
(1)
(2)
Custodianship of shares in CSCS System
Process of Full Dematerialisation of shares in Nigerian Capital Market.
(3)
CSCS Data Exchange Application
Presented By
Mrs. P. O. Onyenwe
Deputy General Manager/Head, Depository Dept.
Central Securities Clearing System
The Depository of The Nigerian Capital Market.
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CUSTODIANSHIP OF SHARES IN
CSCS SYSTEM
Presently most Securities in CSCS depository are held under the custody of
stockbroking firms while those of some institutional or High Net worth
investors are under Custodians or directly under the CSD. Fund settlement is
on a net basis and to the stockbroking firm’s account who in turn distributes to
their clients accordingly.
Custodian client’s fund settlement is equally netted and made to the
Custodian account.
Securities settlement/lodgement are at the beneficial owner’s names
(segregated) and/or Nominee/Omnibus accounts.
In order to achieve greater transparency, confidence of investors and Security
of assets, a new custodial framework for the Nigerian Capital Market is
being proposed by the stakeholders led by Securities and Exchange
Commission
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Proposals being evaluated for consideration are:
1. Mixed Custodianship:
The present asset holding pattern in CSCS under stockbroking
firms and Custodians are maintained with some modifications.
Payments for purchase of shares are to be made into
designated centrally controlled brokers’ accounts or beneficial
owners designated bank accounts.
Brokers execute trades based on mandate.
Cash settlements are made directly into clients’ accounts
through Nigerian Interbank Settlement System. (NIBSS).
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2. Pure Custodianship:
Investor’s Securities are migrated into their account under a
nominated Custodian in beneficial owners’ names or omnibus
accounts as maintained.
The investors’ stockbroking firms are linked to that under
the Custodian for execution of trades.
CSCS process transaction and advises settlement Banks on
Custodian’s financial obligation.
Proceeds are remitted directly to clients' account.
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PROCESS OF FULL DEMATERIALISATION OF
SHARES IN NIGERIAN CAPITAL MARKET
All shares in the Nigerian Capital Market must be deposited in the CSCS
Depository (dematerialised) before transaction can occur on them. This is
the market practice since inception of CSCS in 1997.
Shares bought from the secondary market are processed electronically and
stored in the Depository.
All Bonus and Public Offering shares were issued in physical certificate
forms up to 2006 when Securities and Exchange Commission approved
and announced commencement of electronic lodgement of shares directly into
investors’ CSCS account.
The foregoing led to the current partially dematerialised capital market
environment.
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•The
Nigerian
Commission
is
Regulatory
currently
Authority,
leading
all
Securities
stakeholders
&
Exchange
towards
the
implementation of full dematerialisation of shares in the capital market.
•To this end, a nationwide formal launching of Dematerialisation
programme and Enlightenment campaign are being planned to
commence in November 2010.
•Securities and Exchange Commission will issue guideline to listed
companies and all market operators on the agreed implementation
procedure.
•Registrars are to ensure that the register of members of their principals
(quoted companies) are reconciled, consolidated and forwarded to CSCS
on or before February 2011.
•Completion of the dematerialization exercise is expected to be in
January 2012.
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CSCS DATA EXCHANGE APPLICATION
CSCS Data Exchange application is a complete solution targeted at
achieving a paperless communication with the CSD by its participants. The
solution is built with Life-ray framework and JAVA programming language.
This web-based application has been customised to meet the business needs
of the Nigerian Capital Market participants which includes exchange of
data (in various formats), letters and others requests. The system will go
live in a couple of weeks having completed market-wide Users Acceptance
Test (UAT).
The primary objective of this application it to enable secure and seamless
end to end communication between CSCS and its participants. CSCS’s
participants include; Registrars, Stock broking firms, Settlement Banks,
Custodians, etc.
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DESIGN: This application is not available on World Wide Web. The IP
(Internet Protocol) addresses of the systems used by participants are preregistered and must be validated on sign on. In addition Entrust Token with
eight-layer authentication is used to boost security on the application. Any
entry from unknown source is automatically rejected.
ADVANTAGES: CSCS Data Exchange will provide the participants of the
Nigerian Capital Market with the following advantages.
•Security: The application will provide us the opportunity to exchange data
in a secure manner as every document sent or received is validated.
• Speed: Correspondences to and fro market participants will be achieved
within the shortest possible time.
•Reduced Cost: The cost despatching mails among the market participants
will drastically reduce.
CONCLUSION:
With the Data Exchange in place, the Nigerian Capital Market is on its way
towards achieving complete Straight Through Processing (STP).
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The End.
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