OTC TRANSACTION PROCESS IN NIGERIA A PRESENTATION FROM CENTRAL SECURITIES CLEARING SYSTEM LIMITED ON

Presently OTC transactions occur on Federal Government Bonds in Nigeria are processed and recorded through CSCS as follows:- (a) Bond schedule of transactions are submitted to CSCS in hard and soft copies. (b) All Bond transactions of T + 2 to be submitted to CSCS on trade date or latest by 10.00am of T + 1. (c) Any bond transactions of T + 1 to be submitted to CSCS latest by 3.30pm on trade date. (d) T + 0 transactions to be submitted to CSCS latest by 9.30pm on Day T. (e)Accurate Sellers and Buyers advice are required by CSCS for all transactions.

(f ) Traders/PDMMs to state the particular account number the Bond should be traded from and deposited into. (g) CSCS will notify any of the parties of errors on Bond schedules for amendment and all corrections must be submitted to CSCS thirty (30) minutes after notification. (h) CSCS to advise CBN of the net Bond and cash position of the traders by 2.00pm on daily basis. (i) PDMMs are to collect their Bond statement and daily net activities/positions on each settlement day latest by 3.30pm or visit our web site ( (j) All enquires should be between 3.00pm and 4.00pm daily. (k) CSCS also clears and settles OTC trades on State and Corporate Bonds.

Equities that are not Quoted on the Nigerian Stock Exchange are traded on OTC without processing through the CSCS which lacks transparency, regulation, disclosure and efficiency leading to increased transaction risk. Effort is being made to ensure that such equities are cleared and settled through CSCS. Constructing derivatives on OTC shares involves using any of the existing Securities being traded at the OTC market as underlying which is yet to be developed. Presently in Nigeria, the area the market is looking into is the issue of Exchange Traded Fund (ETF). This involves using Quoted and OTC Securities as underlying assets.

Beyond this, in order to promote higher market integrity, improve transparency and reduce risk, CSCS is also planning to assist the market to ensure that transactions on OTC market are recorded and reported through its data base. By this, CSCS has designed a process flow that will enable OTC Securities (unquoted) to be dematerialized into the depository or processed by means of Trade Repository and thereafter, transactions can occur using the OTC platform through allotment process in the CSCS. This will ensure that at each point in time transaction prices are known and made public on daily basis thereby satisfying regulatory requirements for supporting stability, efficiency and orderly functioning of the financial market.