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Market Digest Nigeria

Business

CBN Releases S4 Business Rules&Guidelines

The Central Bank of Nigeria (CBN) has released Scripless Securities Settlement System (S4) business rules and guidelines.

The CBN explained that it released the guidelines in furtherance of its principal objects to ensure monetary and price stability, to promote a sound financial system and pursuant to the provisions of the CBN Act 2007 and the Banks and Other Financial Institutions Act (BOFIA) LFN 2010.

It noted that the S4, as one of the pillars of global financial markets infrastructure, is a system that holds securities in dematerialised form and enables book entry transfer of securities.

CBN pointed out that in some cases, the system also carries out centralised comparison, and transaction processing such as clearing and settlement of securities.

It said the physical securities shall be immobilised or dematerialised so that they exist only as electronic records and maintains the definitive record of legal ownership, adding that the System holds securities accounts and enables securities to be transferred and settled by book entries according to predetermined multilateral rules.

“Such system allows for the transfer of securities either free of payment – where the transfer of securities does not involve funds, or against payment – where delivery of the securities occurs simultaneously with funds,” it said.

The CBN said the S4 helps in safekeeping, deposit and transfers, interest and principal processing, pledging of securities, issuance of the Government and CBN Securities in electronic form, auction processing, maintenance of all records for authorised transactions and others.

The apex bank said the Business Rules and Guidelines shall regulate issues relating to all the functions and services performed by the S4.

It said these include the rights and obligations of the Regulatory Authority in the performance of its functions; the rights and obligations of the Participants in the operations of the S4; recording of the securities issued in dematerialized form; recording of the rights and ownership of such securities; opening securities accounts, recording and changing of ownership, settlement of the transactions in securities, notification of the issuers and holders of securities, methods for protection against errors in the performance of the functions of the System; manner of establishing and functioning of the System; and other issues within the scope of operations as well as rendering additional services as may be required by the Regulatory Authority.

However, it stressed that only direct participants shall have access to the System, emphasising that the System provides Direct Participants with the Graphical User Interface (GUI) and Batch Adapter (BA) options.

“Both options shall provide the same capabilities to the Participants in their interaction with the System for operations and/or information queries.

“These options shall be made available to Participants at the prevailing cost as may be fixed by the Regulatory Authority,” it said.

View the full guidelines here: https://www.cbn.gov.ng/Out/2017/FMD/S4%20Business%20rules%20and%20guidelines%202017.pdf

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