DEMUTUALISATION NIGERIAN STOCK EXCHANGE PDF

Essentially, what demutualization does is to separate ownership from the right of access to trading on an Exchange. A demutualised exchange is therefore a limited liability company owned by shareholders who provide capital and share in profits or losses. Although, a demutualised exchange will continue to provide virtually the same services, it will have different governance structure in which outside shareholders will have the opportunity of representation on the board of directors. A demutualised stock exchange may take different organisational forms: some exchanges have demutualised and become public companies listed on their own exchanges such as, the Australian Stock Exchange; other exchanges have demutualised, but remained private corporations like the Amsterdam Exchange and the Toronto Stock Exchange. Since the first demutualisation by the Stockholm Stock Exchange in , a number of stock exchanges especially in emerging market jurisdictions have either demutualised or are in the process of demutualising. These include those of Malaysia and India.

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As at March 7, , it has listed companies with a total market capitalization of about N8. The issues addressed here are not regarding the benefits of demutualisation, as research has shown that in comparison with mutual exchanges, demutualised and publicly listed exchanges certainly operate more efficiently when it comes to size, liquidity and financial performance.

However, we are concerned with the context in which demutualisation occurs in Nigeria. That context refers to the corporate governance framework in the country and how amenable it is to successful demutualisation. In , things appeared to be moving forward, as the NSE issued requests for proposals from local and foreign financial advisers to assist with demutualisation. Why Demutualise? Rather, it is implied. This trading volume translates into significant inflows of capital and hence liquidity for investors.

Examples of transactions that will attract liquidity include exchange services for derivatives trading, clearance and settlement.

The prominence of exchange traded funds ETFs as well, have attracted high trading volumes in most exchanges. Exchanges demutualise in reaction to competition and technological innovations. On the competitive front, the NSE would be run as an efficient business enterprise.

The financial sector has always been excited by new technology. It should therefore come as no surprise that changes in the structure of stock exchanges have coincided with periods of greater technological upheaval. As a business responding to competition from other exchanges, there is an ever present need to stay ahead of the game on the technological front.

Innovation in communication and data processing technologies hold a strong appeal to investors who now understand that data is king. It is suggested instead, that as a demutualised exchange, the NSE would operate with a view to earning and increasing profits, thereby increasing its operational efficiency.

The challenge lies with the governing law dealing with corporate matters in Nigeria. This is the Companies and Allied Matters Act It allows the conversion of private companies into public companies and vice versa. However, it does not allow for the conversion of companies limited by guarantee e. Legal prudence requires that if demutualisation is to happen, it must be allowed and regulated under Nigerian law.

The NSE effectively becomes part regulator and part profit making company. In financial markets, these tensions cannot always be reconciled, as conflicts of interests are likely to arise. Demutualisation and Corporate Governance Demutualisation leads to lesser influence of trading members of the NSE on corporate decisions, as their board representation diminishes.

Other type of directors, with expertise in IT systems, product information etc, are brought in to make the exchange more competitive in its strategic outlook. This is the impact of demutualisation on corporate governance — It allows for a more dynamic board that is also investor-controlled.

If it is accepted that corporate governance is inextricably linked to demutualisation, it can be suggested that the NSE is indeed ready for demutualisation as key initiatives by the SEC continue to foster robust corporate governance. The SEC has also been proactive in approving new listing rules that tackle the peculiar concerns of companies cheaper listings being part of a demutualised exchange. Cementing the point on corporate governance, in a Keynote Address concerning Nigerian capital markets, Arunma Oteh, former Director General of the Securities and Exchange Commission, reiterated the integral role of corporate governance standards in fostering investor confidence.

Investor confidence reforms naturally attract foreign investors. It is therefore the case that a demutualised exchange, apart from providing the benefit of increased liquidity, raises the possibility of the NSE being owned by foreign investors. Share this story Copyright Stears News Limited All rights reserved. You may only share Stears Business content using our sharing buttons.

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NSE Demutualisation Crosses Major Hurdle As Buhari Signs Bill

The President assented to the bill on the 29th of August , according to documents seen by BusinessDay. A demutualised NSE will allow the stock exchange become a company limited by shares; having share capital or shareholders, a board of directors, management that is separate and independent from the board and subject to rules and regulations of company operations in Nigeria. According to the Explanatory Memorandum seen by BusinessDay, the act facilitates the expeditious conversion and registration of NSE from a company limited by guarantee to a public company limited by share in order to adopt and efficiently implement the global practice of the demutualization of stock exchanges. The members of the exchange, upon the conversion and re-registration of the exchange to a public company limited by shares, may only be liable to pay tax on dividends declared by the exchange. The act further stated that upon the conversion and registration of the exchange from a company limited by guarantee to a public company limited by shares, all income, assets, property and liability of the exchange held prior to the commencement of the act shall continue, without any limitation, inhibition or restriction to the income, assets, property and liabilities of the exchange as a public limited by shares. According to the Act, NSE will establish a Claims Review Panel made up of a chairman and four other members which will review and determine any assertion by any person to any right in the share of the exchange as such assertion having been made anytime between the coming into force of this act and six years after conversion of the exchange from a company limited by guarantee to a public company limited by shares. Also, a number of stock exchanges especially in emerging market jurisdictions have either demutualised or are in the process of demutualising including those of Malaysia and India.

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Why does it matter to demutualise the stock exchange?

As at March 7, , it has listed companies with a total market capitalization of about N8. The issues addressed here are not regarding the benefits of demutualisation, as research has shown that in comparison with mutual exchanges, demutualised and publicly listed exchanges certainly operate more efficiently when it comes to size, liquidity and financial performance. However, we are concerned with the context in which demutualisation occurs in Nigeria. That context refers to the corporate governance framework in the country and how amenable it is to successful demutualisation. In , things appeared to be moving forward, as the NSE issued requests for proposals from local and foreign financial advisers to assist with demutualisation. Why Demutualise? Rather, it is implied.

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Demutualisation of the NSE

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