The Nigerian Exchange Limited has proposed amendments to its Trading Licence Holders Rules (Part XIIIA) regarding block divestments and large-volume trades.
The key change is lowering the threshold for a transaction to be classified as a block divestment from 30 per cent to 5 per cent of shares.
Market stakeholders were invited to provide feedback on the proposed rules in a notice sent to trading license holders, signed by the CEO of NGX Regulation Limited, Olufemi Shobanjo, on Friday.
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 stipulates that for any transfer or acquisition of 80 million or more shares, or a trade value equal to or above N800 million within one year from the first transaction, approval from the Nigerian Exchange Limited (NGX) must be obtained 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.”
Shobanjo explained that the rationale behind the proposed rule changes is to enhance the monitoring and reporting of share transfers that could significantly affect the total daily volume or value of executed trades on the exchange, as well as any material changes in the shareholding or control structure of a company. Since the rule became effective on February 12, 2018, it has been a key guide in identifying such impactful transactions.
“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.
