Participants in illegal trading on the Nigerian Stock Exchange (NSE) will be forced to turn a new leaf, as the exchange has installed technology to detect such transactions. The technology called SMART which is owned by NASDAQ will be used by the exchange to detect spoofing and layering, as well as carry out monitoring of traders analysis.
Illegal practices the system will detect
Spoofing is when a trader makes a bid, then cancels before execution. Layering is when several such bids are made and cancelled with the aim of influencing the price of a stock. Layering gives a false impression of heavy selling or buying pressure, causing a price movement.
The likely implications
Market manipulation of stocks will be minimized, if not totally eradicated. This enhances transparency and true price discovery on the stock market. Analysing trades also gives the NSE access to data it can use to develop new products or modify existing trading rules. The move by the exchange signals a tightening of its regulatory regime. The NSE recently suspended about 17 companies for late submission of their financial statements.
Excerpts of the Press Release
Nasdaq (Nasdaq: NDAQ) and The Nigerian Stock Exchange (NSE) have officially announced that NSE, the stock exchange of the largest economy in Africa, has launched a new market surveillance platform powered by SMARTS, Nasdaq’s flagship surveillance solution.
The technology will, amongst other things, enable NSE to proactively monitor market manipulation (including spoofing and layering), detect and deter manipulative tendencies, gather intelligence, carry out traders’ monitoring and analysis, conduct multi-asset and cross-market surveillance, and execute risk-based supervision of flagged participants.
“As we enter the growth phase of the development of our market, including the introduction of new asset classes such as derivatives, there will be the imperative of processing significant volumes of market information in real-time to detect anomalies,” said Tinuade Awe, General Counsel and Head of Regulation, NSE. “The SMARTS technology, which we have successfully deployed, allows our team to proactively analyze patterns and trends to make sense of the vast amounts of data for investigative purposes and protection of investors, while strengthening the integrity of our market.”
“Through SMARTS, NSE is leveraging the latest in surveillance technology and demonstrating its commitment to fostering a strong marketplace,” said Tony Sio, Head of Exchange & Regulator Surveillance, Market Technology at Nasdaq. “SMARTS performs universal surveillance of all asset classes and provides a strong platform for NSE to develop new products such as derivatives. We look forward to a long partnership with the NSE as the Nigerian markets evolve.”
Nasdaq SMARTS Surveillance solutions have been the industry benchmark for real-time, cross-market, cross-asset surveillance for 22+ years. Used by over 3,500 compliance professionals around the world, SMARTS currently powers surveillance at 47 marketplaces, 17 regulators and 140+ market participants across 65 countries.
