NSE LIVE! Stock Exchange begins live trading of rights’ shares

Authorities at the Nigerian Stock Exchange (NSE) have launched a new innovation with the commencement of automated trading and settlement of rights’ shares.

The live trading, which took off at the weekend, allows shareholders to sell their provisionally allotted shares through the automated trading system at the Exchange.

Prior to this automation, trading and settlement of rights, where an investor decides to sell on the floor of the Exchange, was done manually.

A rights issue is an offer to existing shareholders to purchase additional shares in a company during the company’s issue of new shares. The invitation to existing shareholders is usually made in proportion to their existing holdings, allowing them to buy the newly issued shares at a fixed price, usually at a discount to market value of the shares, within a specific subscription period.

A rights issue is one of the ways by which a listed company can raise funds from its existing shareholders.

Under the new arrangement, a unique security code, different from that of the underlying security will be assigned to the right issue to be traded.

Executive Director, market operations and technology, Nigerian Stock Exchange (NSE), Mr. Ade Bajomo, said the automation of rights trading and settlement in the Nigerian capital market will enhance price discovery as rights can now be traded and re-traded without settlement complexities.

“It will help eliminate operational challenges resulting from manual trading and cash settlement between counterparties, whilst simplifying counterparty trade reconciliation between the brokers, registrars and the NSE,” Bajomo said.

Explaining the rights trading and settlement process, Bajomo said that for an investor to be eligible to participate in rights trading, he must have a CSCS account set up through a licensed dealing member firm of the Exchange.

In addition, the investor must fund his broker with the consideration value, premium and transaction fees, prior to execution of his mandate.

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