Market Makers Coming to Rescue Stock Market
- By Nik Ogbulie
- Published August 1st, 2011
- News
- Unrated
There are indications that about 15 stock broking firms may be shortlisted to function as market makers in an effort to buoy the highly sliding value of the equities quoted on the Nigerian Stock market.
BusinessWorld can reveal that the market makers will be made up of the top ten stock broking firms operating in the country and the five operators earlier short-listed by the Securities and Exchange Commission (SEC) when it muted the idea as a solution to the debilitating bear run in the stock market.
The development is under very serious consideration presently and may manifest as the last effort of the capital market authorities to mitigate further slide in share prices which has impacted negatively on the level of confidence in the market.
According to regulatory indications, the failure of the slide to abate has left the authorities with no other option than to invite rescuers who must have the capacity to commit huge amount of funds in the market. A capital market expert who is close to the Nigerian Stock Exchange (NSE) and SEC told BusinessWorld that the recourse to market makers could be a veritable approach but there are no indication that the 15 firms being proposed have the capacity to uplift the market since they are the same brokers that had operated within the market all this while without any impactful creativity.
Market watchers believe that only firms that have the capacity to buy and sell stocks at the time that a great level of intervention is needed in the market will be able to make the impact that can buoy the equities.
“They have to have the stocks or good and strong window at their beck and call. As we speak today, there is no borrowing window in the market. The issue of window has to be there. As of now, there are rules on lending or borrowing of stocks in the Nigerian market. The fact still remains that this practice is still alien to many of our market operators and even looks strange to most of them”, he said. There are also revelations which slam the capacity of the selected firms to carry out market-making functions as they are part of a collage of firms that have been suspended or sanctioned over market infringements by SEC itself. It is believed that SEC may be over ruling itself if it goes out to select a firm it had sanctioned a few months ago over some fraudulent market practices for a major role in the market.
“Some of the members of the committee set up for this purpose are still not quite dependable as they were at various times sanctioned for some market infractions, especially the very big players”, our source affirmed. It would be recalled that a Committee on Market Makers was set up three weeks ago. Some of their tasks include the provision of framework for the operation of market makers, as there are no rules yet in existence. This move is largely considered as a fire brigade approach in a last minute effort to rescue the market from total collapse as the slide has been unabating since the last two years.
BusinessWorld can reveal that the market makers will be made up of the top ten stock broking firms operating in the country and the five operators earlier short-listed by the Securities and Exchange Commission (SEC) when it muted the idea as a solution to the debilitating bear run in the stock market.
The development is under very serious consideration presently and may manifest as the last effort of the capital market authorities to mitigate further slide in share prices which has impacted negatively on the level of confidence in the market.
According to regulatory indications, the failure of the slide to abate has left the authorities with no other option than to invite rescuers who must have the capacity to commit huge amount of funds in the market. A capital market expert who is close to the Nigerian Stock Exchange (NSE) and SEC told BusinessWorld that the recourse to market makers could be a veritable approach but there are no indication that the 15 firms being proposed have the capacity to uplift the market since they are the same brokers that had operated within the market all this while without any impactful creativity.
Market watchers believe that only firms that have the capacity to buy and sell stocks at the time that a great level of intervention is needed in the market will be able to make the impact that can buoy the equities.
“They have to have the stocks or good and strong window at their beck and call. As we speak today, there is no borrowing window in the market. The issue of window has to be there. As of now, there are rules on lending or borrowing of stocks in the Nigerian market. The fact still remains that this practice is still alien to many of our market operators and even looks strange to most of them”, he said. There are also revelations which slam the capacity of the selected firms to carry out market-making functions as they are part of a collage of firms that have been suspended or sanctioned over market infringements by SEC itself. It is believed that SEC may be over ruling itself if it goes out to select a firm it had sanctioned a few months ago over some fraudulent market practices for a major role in the market.
“Some of the members of the committee set up for this purpose are still not quite dependable as they were at various times sanctioned for some market infractions, especially the very big players”, our source affirmed. It would be recalled that a Committee on Market Makers was set up three weeks ago. Some of their tasks include the provision of framework for the operation of market makers, as there are no rules yet in existence. This move is largely considered as a fire brigade approach in a last minute effort to rescue the market from total collapse as the slide has been unabating since the last two years.
