NGX Proposes Stricter Rules To Enhance Transparency In Large-Volume Trades

The Nigerian Exchange Limited (NGX) has proposed new rules to address block divestments and large-volume trades in a bid to enhance transparency and market integrity.

In a notice issued to trading licence holders recently, the Chief Executive Officer (CEO) of NGX Regulation Limited, Mr. Olufemi Shobanjo, invited stakeholders to provide feedback on the proposed changes to the Trading Licence Holders Rules (Part XIIIA).

Under the proposed amendments, a trade will be considered a block divestment if it involves a transfer of shares amounting to five percent or more of a company’s total listed shares. This threshold is significantly lower than the previous 30 percent. Additionally, any transfer or acquisition of shares amounting to five percent or more of the company’s total listed shares within a one-year period from the first transfer or acquisition will be classified as a block divestment. If NGX identifies a pattern of transactions that suggest a continued divestment process beyond the one-year threshold, such transactions may be treated as a block divestment and subject to the applicable rules.

Furthermore, the proposed rule includes provisions for large-volume trades. If a transfer or acquisition involves 80 million shares or more, or has a trade value equal to or greater than ₦800 million, within one year from the first transfer or acquisition, the party involved must seek and obtain written approval from the exchange before executing such trades. NGX has emphasised that, should it observe a pattern of transactions indicating ongoing large-volume trades beyond the one-year limit, these may also be treated as large-volume trades at the discretion of the exchange.

Explaining the rationale behind the proposed amendments, Mr. Shobanjo noted that since the original rules became effective on February 12, 2018, they have been instrumental in guiding the monitoring and reporting of share transfers that could have a significant impact on the daily volume or value of executed trades on the exchange. These rules have also been essential in tracking material changes in shareholding and control structures of listed companies.

However, NGX has observed that certain market participants may be structuring trades in a manner designed to circumvent the rules’ disclosure and compliance requirements. To address this, the exchange proposed amendments in second quarter (Q2) 2024 to lower the thresholds for block divestments and large-volume trades. The amendments also introduce clearer parameters for cumulative trades that meet or exceed these thresholds, ensuring full disclosure, whether the transfers occur as a single transaction or through multiple transfers.

NGX believes these changes will close gaps that could enable non-compliant behaviour and will reinforce transparency and accountability within the market. The exchange aims to ensure that all significant share transfers are fully disclosed, thereby enhancing its ability to monitor meaningful changes in shareholder structures and safeguard market integrity.