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.