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

 www.nigerianstockexchange.com & www.nigerianstockexchange.biz

 Orient FM 94.4, Owerri, Imo State; paid announcement 15th April, 2008
 NTA Network News; 9:00pm News November 9, 2007
 AIT Money Show Programme, November 9, 2007; Commissioning Ceremony of the
newly automated Lagos floor of the exchange.
 AIT News 8:00pm; Commissioning Ceremony of the newly automated Uyo & Ilorin
floors of the NSE (2007.)
 Africa Report Magazine, April/May 2008 edition.

Executive Director, Market Operations & IT (ED, MOIT)

As a member of the executive team, the Executive Director, Market
Operations and IT will be responsible for managing the Exchange’s
Information Technology infrastructure and services and trading operations.
He/she will ensure IT investments are value creating and that technology is
leveraged in an innovative and effective manner to achieve the vision of a
competitive and efficient exchange. He/she will be responsible for market
administration, data dissemination and intermediation with Central
Securities Clearing System and Settlement Banks on clearing and settlement
of transactions in securities including Bonds.

Qualification and Experience

Candidates are expected to have understanding and practical knowledge of
the technical infrastructure that drives securities trading platform, capital
markets operations; proven ability to lead, motivate and develop a team of
senior officials with strong engagement, marketing and negotiation skills and
champion the use of information technology to improve business
performance. At least:

• A University Bachelor’s degree or equivalent in an Information Technology

related discipline
• 10 years IT/Market Operations experience including a minimum of 6 years
in senior management positions
• A Master of Business Administration degree will be a clear advantage.