CBN Releases Securities Settlement Guidelines


The Central Bank of Nigeria (CBN) has issued guidelines for the operation of the scripless securities settlement system (S4).
According to the guidelines posted on the apex bank’s website on Monday, the physical securities shall be immobilised dematerialised so that they exist only as electronic records and maintain the definitive record of legal ownership.
The bank said that the S4 is one of the pillars of global financial markets infrastructure as a system that holds securities in dematerialised form and enables book entry transfers on securities.
The CBN stressed that in some cases, the system also carries out centralised comparison and transaction processing such as clearing and settlement of securities, adding that the system holds securities accounts and enables securities to be transferred and settled by book entries, according to predetermined multilateral rules.
The bank explained that the 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.
The S4 also provides central safekeeping and asset servicing which include the administration of corporate actions and redemption to ensure integrity of securities issues.
The CBN added that the functions of the S4 shall also include safekeeping and provides functionality for deposit and transfer of securities to cover the underwriting process or listing of new issues in a market, pledging of securities among others.
The report further explained that the S4 carries out the settlement in cycles  with each cycle starting with the transfer of securities from the seller’s account to the buyer’s account, stressing that in the case of settlement cycle with fund transfer movement from the settlement bank of the purchasing participant to the account of the settlement bank of the selling participant.