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How Information Technology (IT) Has Transformed the Operations of the Nigerian Stock Exchange
By Mac-edwin Obi (Nigeria)
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Before now…….. It took months for a transaction to be completed on the floor of the Nigerian Stock Exchange; investors could tell or even know when their stocks have been disposed of by dishonest stockbrokers, operations of the Nigerian Stock Exchange, just like any other Government Institution at the time were slowed down by bureaucrats.
Then IT came…… IT, acronym for Information Technology has been seen in the NSE (Nigerian Stock Exchange) in the following forms – introduction of Central Securities Clearing System Limited (CSCS); introduction of the trade alert in 2006, launching of official websites (www.nigerianstockexchange.com & www.nigerianstockexchange.biz) for proper enlightenment of the public as to the activities of the NSE; inception of GSM phones etc.
Just recently, the news media in the country were awash with the announcement sponsored by a leading petroleum marketing company asking its shareholders to subscribe to the e-dividend programme of the company. Official sources have it that the industry’s regulatory body – Securities and Exchange Commission (SEC) has made e-dividend mandatory. The romance between the NSE community (Management, Staff, Stockbrokers & the Investing Public) and Information and Communication Technology may just be starting.
It won’t suffice to mention just how IT has manifested on the floor of the NSE without expatiating on their roles in the working of the exchange. Starting with what I call IT’s best gift to the NSE – CSCS, IT has had a profound impact on the stock exchange. And without it (Information Technology), the phenomenal leap in the activities of the exchange in the recent past won’t just be possible. CSCS, short for Central Securities Clearing System Ltd is a few years old but it’s effect is known even beyond the shores of our country. Just as its name implies, it’s a private limited company operating under the NSE. A careful look at its name also gives away its main function – acting as a clearing/settlement machine for all transactions on the floors of the exchange. It’s a securities clearing system which implies that it records all transactions and acts as a bridge between the NSE and the investing public.
In other words, it is to the NSE what a registrar’s office is to a university. Every record of what happens in the stock exchange is kept there. Once a transaction has been certified completed by the CSCS, it is completed truly and cannot be disputed by any other personnel of the NSE. That is to show the level of responsibility vested in the CSCS platform. One may then ask the link between CSCS and IT and this will be explained shortly.
The CSCS is hugely, if not wholly IT-based. The CSCS is like a central hub (Computer Server in a network of computers) which connects and co-ordinates buying and selling of stocks at the NSE. It (CSCS) makes use of computer and telecommunications infrastructures to contact or receive information from players on the market, mainly stockbrokers are stored in the CSCS database. As a result, every stockbroker registers any transaction he makes with the CSCS memory and it is then the duty of the CSCS to verify if the necessary approval has been obtained and thereafter effect the purchase or sale.
Just as I wrote earlier, IT works most for the NSE via CSCS. All facilities like CSCS database, computer systems, phone networks are all IT-based and they quicken transactions time.
Another area where IT is evident in the NSE is trade alert. It is a new innovation of the NSE Director-General, Prof. (Mrs.) Okereke-Onyiuke. Though this programme met with stiff opposition when it was introduced, it has come to be the toast of investors. This phone-based alert programme ensures that investors know when their shares are bought or sold by sending them SMS. Yours truly benefited immensely from this FREE service two months ago when he bought some units of an insurance stock!
With GSM phones almost everywhere (Teledensity in Nigeria is over 15%-Africa Report Magazine, April/May 2008 edition), trade alert is very feasible and about the fastest mode of getting any investor (fewer people use e-mail addresses). Another form IT has been witnessed in the NSE is the ease with which one gets across to any branch of the exchange. I have personally contacted the Port Harcourt Office of the NSE on many occasions and the results have been great.
In the past, NITEL lines as we all know were very problematic. That wasn’t just the problem; only few people had these phones. As a result, it was very expensive getting NSE personnel. Dealing with the NSE became very bureaucratic and this enlongated transaction time. In the long run, it killed business!
The last evidence to show change at the NSE as a result of IT is websites that are linked to the stock market. At the moment, NSE has two official web addresses –www.nigerianstockexchange.com and www.nigerianstockexchange.biz. These websites can give any visitor any information about the operations of the exchange. Market capitalization, all share index, value & volume of stock traded and bulls & bears can all be obtained from these websites, they are the “mirrors” with which the NSE sees itself.
In a world that is becoming IT – based by the minute, these websites together with that of CSCS and stockbrokers and banks will in future play more useful roles in the operations of the stock market. The CSCS website www.cscsltd.com has structures which can enable a registered web user to view his CSCS account online! You can learn if a stock you paid for has been bought or not. That is the power of IT in making investment on the exchange easier.
In the future – The world is becoming modernized by the day. IT drives this inexorable march towards sophistication. For the NSE, better days lie ahead if the present tempo and open-minded attitude of the management to IT is sustained. Who knows we may be buying and selling stocks online in the near future. On November 9, 2007, a further automated Lagos floor was launched by President Yar’Adua (AIT Money Show Programme, 10:00am November 9, 2007 & Network News of NTA 9:00pm). This shows that the journey ro IT deployment on the market is a continuous one. Uyo & Ilorin were recently automated & launched.
With better IT support, CSCS can reduce the present T + 3 (trading day + 3 business days-transaction time) to T + 0! It’s possible to begin and complete a transaction in one business day. One may be able to access value of his investment via trade alert. E-dividend is the current song of the market. Oando is leading, others will definitely follow (Vanguard Newspaper March, 2008) with IT, investment on the NSE will become increasingly hassle-free.
Bibliography
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www.nigerianstockexchange.com & www.nigerianstockexchange.biz
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Orient FM 94.4, Owerri, Imo State; paid announcement 15th April, 2008
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NTA Network News; 9:00pm News November 9, 2007
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AIT Money Show Programme, November 9, 2007; Commissioning Ceremony of the newly automated Lagos floor of the exchange.
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AIT News 8:00pm; Commissioning Ceremony of the newly automated Uyo & Ilorin floors of the NSE (2007.)
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Africa Report Magazine, April/May 2008 edition.
