In a bid to make trading more efficient, the Securities and Exchange Commission (SEC), has issued ‘an interoperability/financial infrastructure link framework’ which will also improve settlements and making the market globally competitive.
The Commission said this in a statement released recently that there has been a “…remarkable growth in the last few years in terms of size, market participants and tradable instruments.”
It further said that the growth has “…impacted the market structure in terms of composition and interconnectedness.”
According to the statement, “Consequently, Interoperability arrangement has become necessary in order to enhance the efficiency of trading and settlement functions as well as align the market with international best practices.
“According to the Committee on Payments & Market Infrastructures and International Organization of Securities Commissions (CPMI-IOSCO) Principles on FMIs, FMI link is a set of contractual and operational arrangements between two or more FMIs that connect the FMIs directly or through an intermediary.
“The Interoperability arrangement will potentially liberalize trading and settlement activities, enhance efficient deployment of capital as well as cost effectiveness in the market.”
Noting the important nature of the FMI issuance on efficiency and investor protection, the Regulator said, “It is in this regard and the need to ensure the efficiency of the market and the protection of investors that this framework is being issued.
In the Interoperability arrangement, as recommended by the CPMI-IOSCO Principles for FMIs, relevant provisions have been made for identification, monitoring and management of interlink risks by the respective CSDs with the overall objective of reduction in systemic risks.”
The SEC finally gave the following guidelines to all Capital Market Operators registered by the Commission. “In this regard, all Securities Exchanges and Central Securities Depositories (CSDs) are required to comply with the following:
“Take necessary steps to put in place requisite infrastructure and systems for implementation of the framework, including any amendments to the relevant rules and regulations.
“Bring to the attention of their members and Participants the provisions of this framework as well as publish the same on their websites.
“Communicate to the Commission, the status of implementation of the provisions of this framework within three months of the date of issuance of the framework.”
Azuka Edokobi is a Writer and Entrepreneur