By NKIRUKA NNOROM

The Nigerian Stock Exchange, NSE, has said that the securities lending and market making activities introduced to boost stock market activity and inject liquidity into the market performed beyond expectation in 2014.

The Chief Executive Officer of the NSE, Mr. Oscar Onyema, expressed the regret while reviewing the performance of the capital market in 2014 and making prognosis into the New Year.

Securities lending is the market practice of temporarily transferring securities, for a fee, from the holder (the lender) to another party (the borrower), with the borrower agreeing to return the securities to the lender either on demand or at the end of the agreed loan term.

This practice usually requires the borrower to collateralize the transaction with cash or other securities of a value equal to or greater than that of the lent securities, in order to protect the lender against counterpart credit risk.

Securities lending plays an important role in capital markets by providing liquidity, which in turn reduces the cost of trading and promotes price discovery.

Market Making on the other hand, is the act of entering bid and offer prices in the automated trading system for a specified security.

The primary role of a market maker is to maintain a fair and orderly market in its particular securities of responsibility and, in general, to contribute positively to the operation of the overall market.

In 2012, the NSE commenced marketing making activity with appointment of 10 market makers with the sole aim of stabilizing and boosting liquidity in the market and later appointed another 13 supplementary market maker as supplementary liquidity providers. A year after in 2013, three agents – Stanbic IBTC , UBA, Capital Bancorp and First Bank were appointed as securities lending agents with the hope that securities lending would make the market making more active vibrant.

However, Onyema told journalists during the review that both products have not performed optimally due to low level of interest by operators and investors, which had resulted in minimal uptake.