Stock Exchange adds to Market Making stocks

Nigerian Stock Exchange
Nigerian Stock Exchange

Market Makers now have 28 stocks they can act on.

 

The Nigerian Stock Exchange (NSE) has added three stocks, all from the banking sub-sector, to the list baskets of Market Makers, effective Thursday.

The three stocks from the United Bank Plc; Ecobank Transnational Plc and Skye Bank Plc will be included in the stocks that Market Makers will act on, in line with the phased introduction of additional stocks.

This, the Exchange said in a statement on Wednesday, is in line with the promise made by the Exchange that all the stocks quoted on the Exchange that are trading above par value will be added to the Market Making programme over a period of six months.

A market maker is usually referred to as a company (bank or broking firm) that quotes both a buy and sell price of a financial instrument, hoping to make a profit on the bid.

Market making is of advantage to stock because when one places an order to sell his or her shares of a company, the market maker, usually a bank or broking firm can purchase the stock even if he does not have a seller ready. Through that, a market is literally being made for the stock, an advantage these new and existing stocks in this category would be benefitting from.

Market making is aimed at infusing liquidity into the Exchange, and enhancing activities. The Stock Exchange’s market liquidity increased 46.4 per cent to an average of N3.42 billion per day in September.

The nation’s stock market has been reacting positively since the commencement of Market Making on the Nigerian bourse.

For instance, the market capitalisation and All-Shares Index that stoop at N8.077 trillion and 25,373.83 respective on the eve of the commencement, stood at N8.628 trillion and 27,077.66 at the close of trading activities on Monday, October 15, representing an increase 6.8 per cent.

The initiative which kicked off in September 2012 with 16 stocks had nine other stocks added two weeks back. The additional three additional stocks now bring the number of stocks that Market Makers are making market on to 28.

The stocks covered by the initiative now are: PZ Cussons Nigeria Plc; Nigerian Bag Manufacturing Company Plc; Presco Plc; International Breweries; Lafarge Wapco; Fidson Healthcare Plc; Redstar Express Plc; Zenith Bank Plc; Sterling Bank Plc; D.N.Meyer; Diamond Bank; FCMB; Fidelity Bank Plc; Nigerian Breweries Plc; Guaranty Trust Bank Plc and UAC Nigeria Plc. (UACN).

Others are Access Bank; Academy Press; Custodian & Allied Insurance; First Bank Plc; Dangote Sugar Plc; Union Bank Plc, NASCON and Nestle Nigeria Plc as well as AIICO Insurance Plc and the three newly added ones.

While reacting to the market maker policy, the Managing Director, Financial Derivative Company, a finance research and analysis firm, Bismarck Rewane, said there has been activity increase in “small cap stocks in the portfolio of market makers, but no significant change in activity of large and mid-cap stocks”.

He said the “impact of market making activity will be better judged in upcoming months. The growth in liquidity of 46 per cent is the indicator to watch.”