NGX proposes tougher rules for large-volume trades

The Nigerian Exchange Limited has proposed new rules on block divestment and large-volume trades.

Market stakeholders were invited to share their feedback on the proposed rules in a notice to trading licence holders signed by the Chief Executive Officer of the NGX Regulation Limited, Olufemi Shobanjo, on Friday.

The amendment is to  Trading Licence Holders Rules (Part XIIIA)  on Block Divestments and Large Volume Trades.

The proposed change includes that “trade shall be treated as a block divestment where it involves: a) a transfer of shares amounting to five per cent,” it used to be 30 per cent.

“A transfer of shares or acquisition of additional shares amounting to five per cent or more of the company’s total listed shares within a period of one year from the date of first transfer or acquisition of shares.

Where The Exchange identifies a pattern of transactions suggesting a continued divestment process beyond the one-year threshold, such transactions may, at the discretion of The Exchange, be treated as a Block Divestment and subject to the applicable rules and requirements.”

Another proposed rule change said that a transfer of shares or acquisition of additional shares of 80 million units or more of the company’s total listed shares or trade value equal to, or above N800m within a period of one year from the date of the first transfer or acquisition of shares, shall apply for and obtain the written approval of the exchange before executing such large volume trades.

The local bourse warned that should its approval not be sought and it notices a pattern of transactions suggesting a continued process of large volume trades beyond the one-year threshold, “such transactions may, at the discretion of The Exchange, be treated as large volume trades and subject to the applicable rules and requirements.”

Explaining the rationale for the proposed rules, Shobanjo said that since the rule became effective on February 12, 2018, it has served as a guide for monitoring and reporting the transfer of shares that are likely to have a significant impact on the total daily volume/value of executed trades on The Exchange and material changes in the shareholding/control structure of the Issuer.

“However, in reviewing applications and monitoring such trades, The Exchange has observed that certain market participants may be structuring trades to circumvent the Rules’ disclosure and compliance requirements. In response to these risks, The Exchange proposed amendments in Q2 2024 to lower the respective thresholds for Block Divestments and Large Volume Trades in a company’s total listed shares.

“The Exchange further reviewed the said amendments and is also defining permissible parameters for cumulative trades that meet or exceed the defined thresholds to ensure full disclosure, whether the transfers occur as a single transaction or through multiple transfers.

“The Exchange believes these amendments will help close gaps that could allow non-compliant behaviour, reinforcing transparency and accountability. The changes are designed to ensure that any significant share transfers are fully disclosed, enhancing NGX’s ability to monitor meaningful changes in shareholder structure and safeguard market integrity,” he said.