Adopt STP tech to attract youths, rural dwellers’ participation, stakeholders urge NGX

AS the Nigerian Exchange Limited (NGX) considers adopting straight-through processing (STP) to facilitate equity transactions, stakeholders said the Exchange should use the technology to attract youths and rural dwellers’ participation in the capital market.

The stakeholders said this at an NGX Retail Investors Workshop that discussed the theme, ‘Straight Through Processing of Equity Transaction,’ on Wednesday, July 5.

Discussants at the workshop believed the STP technology would revolutionise trading, remove manual errors, improve the security of transactions, create a seamless settlement, and improve real-time trade in the capital market, among others.

The ICIR recalls that the director-general of the Securities and Exchange Commission (SEC), Lamido Yuguda, had said the capital market was working to develop products that would make the market attractive to the younger generation.

The move was one of the provisions of the revised capital market plan, Yuguda said, while urging capital market operators to develop technology that would ease participation by youths, whom he said did not want to access the market by “filling five-page forms”.

“The youths just want to pick up their phones and make investments,” he stressed.

In a report titled, ‘Capital Market Inclusion’, the Enhancing Financial Innovation & Access (EFInA) asserted that the capital market could help drive financial inclusion in the country.

At the workshop, the president of the Association of Assets Custodians of Nigeria (AACN), Abiodun Adebimpe, said the ultimate goal of STP would be to attract the younger generation into the capital market.

“We know what happens when you have more participation in the market. The market becomes more liquid, price discovery becomes easier and faster, transactions are happening regularly, and high volume occur because you have more interest in the market,” he maintained.

The adoption of STP would also help to attract rural dwellers, the digital channel lead at United Capital Securities Limited, Martha Ehizele, added.

Ehizele noted that rural dwellers’ financial literacy level was low, and they were also confronted with the challenge of not having access to financial institutions, the Internet, and the use of smartphones.

According to her, one innovation she believed would would work in the rural area is an equity trading platform that is based on the use of unstructured supplementary service data (USSD), a communication protocol that uses quick codes.

She suggested that if the STP would work in the rural areas, some of the broker firms would have to extend their offices to the rural areas, as the use of mobile money had tested the workability of that means.

“For me, if we talk about the USSD as an equities-based platform, from onboarding to when you get your money in your account, it will really work in the rural areas. That model is already in existing in a few countries. We have it in India, Kenya and Bangladesh,” Ehizele said.

The head of custody product and investor services at Africa Standard Bank Group, Hari Chaitanya, said Nigeria could do well by learning from successful markets worldwide, like India, which has adopted the STP technology.

“The regulator sets the goal, and the market work to achieve it,” Chaitanya said.

Technology remains the big elephant in the room in the capital market, president of the Institute of Capital Market Registrars (ICMR), Oluseyi Owoturo, pointed out.

“I know that the NGX, for example, has instituted some standards; maybe we need to look at those standards again to ensure that they meet the requirements of STP,” Owoturo said.

He stressed that despite the bank verification number (BVN) identification, the Exchange and the banking industry appeared not to be working in tandem, as there is a lack of connectivity between the two for smooth equity market transactions.

“We have to understand that it is one ecosystem. Until the ecosystem works as one, the challenges will remain,” he said.

The divisional head of capital markets, Jude Chiemeka, said the NGX wanted to adopt STP equity transactions to make the current trading assessment cycle more competitive globally.






     

     

    “STP is a mechanism that coordinates end-to-end trading and provides the means of transaction from the point of first deal to final settlement.

    “The equities market is constantly evolving, and it is imperative we keep the latest trends and technologies to be sure that as a platform provider, we provide investors the best possible service,” Chiemeka said.

    He noted that adopting STP would help increase market transparency, reduce risk and errors, increase overall market efficiencies, and make the market cost-effective, among others.

    “It is important to state that the previous macroeconomic challenges, resulting in the exit of foreign investors, appear to have continued in the new administration with the unification of foreign exchange in the exporters and importers window, and the removal of fuel subsidy,” he added.

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