Stories by Chinenye Anuforo
The Director General of Securities and Exchange Commission (SEC), Mr. Mounir Gwarzo, has announced that it has now become mandatory for all investors in the nation’s capital market to key into the Direct Cash Settlement (DCS) initiative as from September.
However, up till now some investors are not aware of the DCS initiative and how it works and so, it becomes pertinent we look at what investors will gain by embracing the initiative.
Recall that Gwarzo speaking at post-Capital Market Committee (CMC) meeting press conference in Lagos, said the CMC has agreed that the DCS would become mandatory for every investor.
His word: “The DCS initially was voluntary but when we saw recent events in the capital market, the CMC came together and said the best way to do it is to make it mandatory. Everybody will be inside the net. It is only if you do not want to key into it, you can then opt out. The CMC set up a committee, which did a very robust job and we have resolved that from September 1, 2017, DSC will be mandatory for every investor. Meaning that every investor in the market will key into the DCS unless the investor decides to opt out,” he said.
According to him, the DCS has not only reduced level of complaints on diversion of investors’ money, but has also brought speed and transparency to the market.
What is DCS?
The Direct Cash Settlement (DCS) is a process where cash proceeds from trades executed by brokers on the Nigerian Stock Exchange (NSE) is remitted directly into investors’ nominated bank account. This is part of the on-going initiatives to improve transparency in the exchange, ensuring investor confidence, reducing infractions in the market as well as improving trading velocity.
As against the current general practice where proceeds of sale for investors’ transactions go into the bank accounts of the brokers for onward disbursement to their clients, the practice under the Direct Cash Settlement would be to send the net proceeds directly from the clearing and settlement system to investors’ accounts while the existing practice of payment through brokers would only happen where clients opt not participate in the initiative.
Commenting on the initiative, the Chief Executive Officer, InfoWARE Limited, Uwa Agbonile, said “Obviously, we believe this is an important step towards boosting investors’ confidence in the market. As a leading provider of solutions in the Nigerian Capital Market, InfoWARE has consistently and actively driven adoption of new policies in the industry for the dealing community. We will continue to expand our platform capabilities to support them as they grow the scope of their business and ultimately be able to meet upcoming operational requirements posed by clients, regulators and the markets in which they operate.“
Investors are encouraged to contact their stockbrokers for more information on how to opt in to the Direct Cash Settlement initiative.
How does it work?
•Settlement of each trade carried out on the Automated Trading System of the Exchange shall be done by direct payment into the client’s account as provided to the CSCS.
•Within three working days of receiving instructions from a client for direct payment into such client’s account, a broker-dealer shall:
Notify CSCS of the client’s instructions; and provide the client’s account details after validation at NIBSS portal, CSCS confirms from the affected Settlement Bank. On confirmation, CSCS updates the investor’s details
How investor accounts can access Direct Cash Settlement
Each client’s bank account details shall be provided by the investor to his/her broker-dealer who in turns transmits same to Central Securities Clearing System Plc. (CSCS), which is the agent of the Exchange for the clearing and settlement of all securities traded on NSE Automated Trading System.