The Central Securities Clearing System (CSCS) Plc on Tuesday presented Securities Lending and Borrowing (SLB) and Post-Trade Allocation process flows to the capital market operators with the view to enhancing market liquidity. The presentation took place at an event organised by CSCS in Lagos.
Explaining how this arrangement works, Mr. Joseph Mekiliuwa, General Manager, Operations, Central Securities Clearing System (CSCS) Plc said the SLB arrangement would enable market participants to lend securities from a registered Securities Lending Agent (SLA). This arrangement is open to the Custodian Banks and their brokers.
Speaking further, Mr. Mekiliuwa said the arrangement would aid market participants to go short by selling securities that they do not have and lending from the SLA to cover their short position before settlement date. The Post – Trade allocation arrangement will enable stockbroking firms buy securities en-bloc into a pool account on behalf of a custodian firm and on the same day re-allocate same securities to the beneficial owner’s accounts domiciled with the custodian firms according to the beneficial owner’s mandate.
According to Mr. Mekiliuwa, ” foreign institutions that are willing to participate in the SLB are required to appoint a local SLA in Nigeria, who will act on their behalf. It is the responsibilities of concerned parties to ensure that the securities lending contracts agreements are in compliance with the best practice and applicable laws accordingly. However, this document covers the account holding structure, securities transfers or detachments and other related processes to facilitate timely delivery of securities”.
However, CSCS will not allow lenders such as custodians or dealing firms lend shares on behalf of the owner of the shares either from a segregated or omnibus account without the Securities Lending Authorization Agreement (SLAA).
For transfers that is required by a borrower to settle short sale transactions, Mr. Mekiliuwa told the participants that the SLA and borrower would have to complete the transfer request latest by 12.00 noon, two days before settlement (SD – 2). This, he said, would allow CSCS deliver the shares into the borrower’s account a day to settlement (SD-1).
The event was attended by participants from custodian firms, settlement banks, brokers to custodians firms and The Nigerian Stock Exchange (NSE).
