Key Points
- SEC sets 5pm on T+1 as the settlement deadline for eligible equities and commodities.
- Market operators must ensure affected transactions are fully funded within the timeframe.
- Foreign portfolio investors will not be required to prefund trades.
- SEC says the reform will reduce settlement risks and improve market efficiency.
Main Story
The Securities and Exchange Commission (SEC) has set 5:00 p.m. on the first business day after trading as the deadline for settling eligible equities and commodities transactions in Nigeria’s capital market.
The commission announced the requirement in a circular issued on Wednesday to capital market operators and other market participants.
The directive is part of the implementation of the T+1 settlement cycle, under which eligible securities transactions must be completed one business day after the trade date.
SEC said all affected transactions must be fully funded by 5:00 p.m. on T+1 to comply with the market’s Delivery versus Payment (DvP) settlement procedure.
It said brokers and dealers whose trading accounts do not have sufficient funds to meet their settlement obligations would be subjected to default procedures under the Central Securities Clearing System (CSCS) Default Management Procedure.
The commission also clarified that foreign portfolio investors would not be required to prefund their accounts before executing trades in the Nigerian market.
It, however, directed capital market operators handling transactions for foreign investors to maintain adequate controls to ensure that funding and settlement are completed within the prescribed period.
According to SEC, operators are expected to establish processes that prevent delays and ensure compliance with the T+1 settlement timeframe.
The commission said the shorter settlement cycle would strengthen market infrastructure and improve operational efficiency.
It added that the reform would reduce counterparty risks, improve settlement efficiency and support greater liquidity in the capital market.
SEC said the move would also bring Nigeria’s post-trade environment closer to international standards and enhance the competitiveness of the country’s capital market.
The Issues
The shift to T+1 reduces the time between executing a trade and completing its settlement. The new requirement places greater emphasis on timely funding and operational controls by brokers, dealers and other market participants.
What’s Being Said
“Accordingly, all transactions in the affected securities must be fully paid by 5:00 p.m. T+1.” – Securities and Exchange Commission
What’s Next
Capital market operators will be required to ensure that eligible transactions are fully funded and settled within the new T+1 timeframe. Operators handling foreign portfolio investments must also maintain controls to ensure timely settlement.
Bottom Line
The SEC’s T+1 settlement framework shortens the settlement period for eligible securities and commodities transactions, with the commission expecting the reform to improve efficiency, reduce counterparty risk and strengthen Nigeria’s capital market.
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