Functions and Day-to-Day Operations of The NSE
The Nigerian Stock exchange offers benefits to both companies and inverstors alike. Their services are also duly standardized towards ensuring safety.
Depending on who you are, investor or company owner, the Nigerian Stock Exchange would mean different things to you. On the one hand, it offers the investor an avenue to build wealth and be a part of economic development.
On the other, it provides a wide access to finance to companies that are quoted on it. The operations of the Nigerian Stock Exchange are standardized and its functions are just as guided as any other exchange across the world.
This article is simply to give you an overview of what the functions of the Nigerian Stock Exchange as well as a peek into the everyday operations of the exchange.
Functions of the Nigerian Stock Exchange
The overall expected outcome of the Nigerian Stock Exchange is to:
"Contribute to improving liquidity in the market, and to renew investor and issuer confidence, by increasing competiveness, and creating greater visibility into our capital market for global investors, analysts and data vendors.”
Its specific functions include:
- It provides an opportunity for investors to buy and sell securities
- It provides an opportunity for businesses to raise funds from the general public
- It serves as a catalyst for economic growth and development
- It provides relevant information for the general public – both potential investors and owners alike – to make relevant decisions
- It helps in assessing the Nigerian economy in terms of liquidity while also facilitating dealings in government-owned securities/
- It provides guiding rules and principles to protect the public from fraud and other wrong dealings
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Day-to-Day Operations of the NSE
Trading Periods:
The Nigerian Stock Exchange is open 30 hours per week which is average. Most stock exchanges are open 25 to 35 hours per week with 5 days of trading per week. The NSE, however, does not open on weekends neither does it close for lunch.
On its working days, Monday to Friday, it opens at 10.00am and closes at 4:00pm. There are extended hours of trading that cover both pre-market trading which is before 10:00am and after-market trading which takes place after 4.00pm.
The essence of this period is to give room for investors to act quickly on information that comes out when markets are officially closed. While Stocks can only be traded on the Nigerian Stock Exchange during official trading hours, unofficial extended hours trading markets will carry trades until markets re-open.
Clearing of funds:
When trade takes place, whether buying or selling, the transactions are not concluded immediately. Rather, it takes a period of 4 days before the entire transaction is concluded.
In the NSE, clearing and settlement is T+3 which represents time + 3 days.
__Industry Sectors:__
There are 12 sectors companies can be listed on The Nigerian Stock Exchange. They include: Agriculture, Construction/ Real Estate, Consumer Goods, financial services, Healthcare, Industrial Goods, Information & Communications Technology, Natural Resources, Oil & Gas, Services, Utilities, and Conglomerates.
Markets segments:
The NSE also has some market segments that show the different liquidity levels of the market. They consist of the Main Board, the Premium Board, and the Alternative Stock Exchange Market (ASEM). The Premium Board includes the most capitalized stocks on the exchange, the main board includes about 190 stocks and is as liquid as the Premium Board and the ASEM is a market for smaller stocks and is highly illiquid.
Obtaining Data:
In order for investors to make relevant decisions, they need to have access to relevant and timely information. The first source of this data is from the company itself in terms of their financial statements.
The NSE also offers information on its website regarding closing day prices and so on. For comprehensive market data regarding your investments including portfolio management, Yochaa serves as a more convenient and easy-to-understand platform.
Written by Lawretta Egba.