‘Fringe players render brokerage firms unattractive for foreign partnership’

Stories by NKIRUKA NNOROM

The Chief Executive Officer of the Nigerian Stock Exchange, NSE, Mr. Oscar Onyema, has said that high number of fringe players among stockbroking firms in Nigeria has continually rendered the brokerage firms unattractive for foreign partnership.



Delivering a paper on ‘Benefits of a Consolidated Stockbroking Industry’, at the Association of Issuing Houses of Nigeria, AIHN’s workshop in Lagos, Onyema said that high number of very small members also renders the broker business model economically non-viable for most players, which leads to several issues regarding professionalisation of the market.

At the present, he said that each of the top 10 players (which constitute 60 percent of both volume and value traded in the market) accounts for $1.7 million of the revenue distribution among the brokers, while the remaining 297 (40 percent) account for paltry $39k per broker.

He said that the Exchange in conjunction with the Securities and Exchange Commission, SEC, has adopted a two pronged approach to maintain the stability of the Nigerian capital market and to strengthen the operator.

These, according to him, include introduction of minimum operating standards (MOS) by the NSE and minimum capital requirements by the SEC, saying that enforcement of these two standards are imperative for the success of the Exchange in meeting its strategic objective to be the leading exchange in Africa.

With the new minimum standard to be rolled out, Onyema said that the stockbroking firms would be better equipped to play on the global sphere and would encouragehigh retail penetration and institutional flows.

It would engender broker capabilities through introduction of innovative products and services, as well as professional and responsible research, he added.

“The new standards will cater for all three classes of dealing members (broker dealers, brokers and dealers) and address five broad areas of concentration and the objective is to transform market operators now with minimum operating standards in a concise manner that is both easy to comprehend and implement,” he said.

“In addition to a consolidated brokerage industry, it is imperative to consider other factors that will drive efficiency in the Nigerian capital market. Such factors include expanding investor reach, both internationally and domestically, elevating broker capabilities, strengthening the regulatory framework and ensuring clear vision and economic viability of the brokerage industry,” Onyema added.

He stated that going forward, the target is reduce the number of stockbroking firms to around 100 to 50 members and to also achieve a competitive broker market with large players providing value added services (e.g. analysis, coverage, road shows ) as the NSE’s distribution channel locally and internationally.

-Culled from : http://www.vanguardngr.com