SEC Issues Framework For Interconnecting CSDs

The Securities and Exchange Commission (SEC) has commenced moves
to ensure interconnectivity and interoperability among the Central
Securities Depositories (CSDs) to enhance the efficiency of trading
and settlement system in the capital market.

The Commission stated this yesterday in a notice titled:
“Interoperability among Central Securities Depositories: Proposed
Interoperability/FMI Link Framework”, saying that interconnectivity
among the CSDs would ensure investor protection, while aligning the
operations in the market with international best practices.

In line with the framework, the Commission said that all the
securities exchange and CSDs in the capital market are expected to
establish a peer-to-peer link to facilitate interoperability with
each other and put in place the required infrastructure, systems,
processes and risk management for the effective operation of the
interoperable arrangement.

According to SEC, the CSDs are also expected to allow for fair
and open access to their services based on reasonable risk-related
access requirements as well as have adequate reconciliation
procedures to ensure that their respective records are accurate and
current.

“The Nigerian capital market has witnessed remarkable growth in
the last few years in terms of size, market participants and
tradable instruments.

This has impacted the market structure in terms of composition
and interconnectedness. In the secondary market particularly, there
are currently multiple trading platforms and Financial Market
Infrastructures (FMIs) which provide comparative services in
depository, trading, clearing and settlement activities.

“Consequently, interoperability arrangement has become necessary
in order to enhance the efficiency of trading and settlement
functions as well as align the market with international best
practices.”

The Securities and Exchange Commission (SEC) has commenced moves
to ensure interconnectivity and interoperability among the Central
Securities Depositories (CSDs) to enhance the efficiency of trading
and settlement system in the capital market.

The Commission stated this yesterday in a notice titled:
“Interoperability among Central Securities Depositories: Proposed
Interoperability/FMI Link Framework”, saying that interconnectivity
among the CSDs would ensure investor protection, while aligning the
operations in the market with international best practices.

In line with the framework, the Commission said that all the
securities exchange and CSDs in the capital market are expected to
establish a peer-to-peer link to facilitate interoperability with
each other and put in place the required infrastructure, systems,
processes and risk management for the effective operation of the
interoperable arrangement.

According to SEC, the CSDs are also expected to allow for fair
and open access to their services based on reasonable risk-related
access requirements as well as have adequate reconciliation
procedures to ensure that their respective records are accurate and
current.

“The Nigerian capital market has witnessed remarkable growth in
the last few years in terms of size, market participants and
tradable instruments.

This has impacted the market structure in terms of composition
and interconnectedness. In the secondary market particularly, there
are currently multiple trading platforms and Financial Market
Infrastructures (FMIs) which provide comparative services in
depository, trading, clearing and settlement activities.

“Consequently, interoperability arrangement has become necessary
in order to enhance the efficiency of trading and settlement
functions as well as align the market with international best
practices.”