By Goddy Egene, 21 Feb 2011

The Central Securities Clearing Systems Limited (CSCS) is currently seeking the support of the Securities and Exchange Commission (SEC) to operate as a custodian in the nation’s capital market.

 

The CSCS is currently the clearinghouse for the market. It   clears and settles shares transactions in the capital market. However, as the apex regulator and Nigerian Stock Exchange (NSE) moves to establish custodian institutions as part of efforts to protect investors in the market, CSCS was said to have signified interest to play this role, THISDAY checks have revealed.

 

It was gathered that two banks have also signified their intention to become custodians in the market. However, a source close to the Commission said that some operators believe that making a bank that has stockbroking interest in the market a custodian would be prone to insider abuse.

 

“That is why we are thinking of an independent institution that has the capacity to play that role as we move forward. And I can confirm to you that CSCS has signified interest in that regard and from what I learnt, the clearing house has already reached out to SEC for support,” the source said.

 

It was gathered that the CSCS is asking for the ‘blessing’ of SEC in a bid to get the approval of the Central Bank of Nigeria (CBN) for special banking licence to act as a custodian.

 

“The licence from the CBN is not going to be for deposits mobilisation or normal banking activities but for the purpose of playing the role of a custodian in the stock market. Basically, there are two critical factors to operate perfectly as a custodian in a stock market.

 

One is the achievement of dematerialisation, which make all the shares resident in a central depository. The second is the special licence by the CBN. The licence will enable CSCS act as Central Counter Party (CCP),” a market source explained.

 

The source added that with CCP status, CSCS would able to act as middle man,  receiving   and making payments for all shares on behalf of investors in the market.

 

Currently CSCS clears and settles transactions through appointed settlement banks and since its inception in 1997, the company has cleared and settled transactions worth N7.2 trillion.

Source: Thisday