THE IMPACT OF INFORMATION COMMUNICATION TECHNOLOGY ON THE TRADING OF STOCKS IN NIGERIAN STOCK EXCHANGE, KADUNA

THE IMPACT OF INFORMATION COMMUNICATION TECHNOLOGY ON THE TRADING OF STOCKS IN NIGERIAN STOCK EXCHANGE, KADUNA

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CHARTER ONE

INTRODUCTION

1.1       Background of the Study

There are topical issues posing serious challenge to policy makers and competitors in both public and private sector of the economy, these challenges result from the advances in information technology and the increasing integration of global economy.

One of the areas that are facing these challenges as a result of the advances in Information communication technology is the stock market. This advancement in information communication technology have transformed the securities market via the use of electronic networks there by changing the scope, pace, range as well as the procedures used by investors  and agents to offer, trade and distributive shares globally. Mutual funds are using the internet to communicate with investors and to distribute shares. Corporate issuers, large and small conduct offer on the internet. Investors are starting to by-pass traditional exchange and dealer-based trading system using electronic network to deal directly with stock brokers at lower cost. Retail customers are trading stocks on-line rather than calling or visiting a broker.

Therefore, globalized nature of this market made possible by modern information communication technology and the growing ascendancy of a free market, as such, the Nigeria stock exchange has resorted to the implementation of the Central Securities Clearing System (CSCS), Automated Trading System (ATS), Trade Alert (TA) and Electronic Bonus in order to meet up with paper- less world created by modern technology.

1.2       Statement of the Problem

Recently, Nigerian Stock Exchange has been automated. The purpose of this automation is to ensure that the efficiency of the operations of the stock exchange improve substantially. It is hoped that as a result of the automation, operations of the exchange will be discharged effectively and efficiently and all benefits derived due to Information Communication Technology are judiciously enjoyed.

In spite of the automation of the Stock Exchange, there exist series of complaints such as investors not comfortable with not having share certificates, inadequate network coverage facilities within the country that limit the access of rural dwellers on their stock accounts, Trade Alert not effective due to erratic power supply, just to mention a few.  The series of complaints triggered the need to conduct an empirical research in order to establish whether or not Information Communication technology has significant effect on the stock Exchange activities.   

1.3       Objectives of the Study

The objective of this study includes the following

                    i.            The efficiency of Information Communication Technology on the trading of stocks in the Nigerian Stock Exchange.  

                  ii.            The performance of Nigerian Stock Exchange since the introduction of Information Communication Technology.

                iii.            The cost of using Information Communication Technology on the trading of stocks in the Nigerian Stock Exchange.

                iv.            The preference between Call-over Trading System and Automated Trading System after the introduction of Information Communication Technology in Nigerian Stock Exchange.

1.4       Significance of the Study

The researcher considers this project significant in view of the fact that Information Communication Technology has a significant impact on the trading of stocks in Nigerian Stock Exchange and this is of great interest to the researcher. The crucial role Information Communication Technology plays in the development of the Nigerian Stock Exchange is that first and foremost to the management of the Nigerian Stock Exchange, it reduces the delay in the execution orders, enhance transparency in transactions and provide adequate opportunity in pride delivery.

Secondly, Information Communication Technology helps bring stocks dealing closer to the investors through the use of Alert Systems.

Thirdly, the use of Information Communication Technology will help government to actually determine the real amount due to them and as at when due. This is because the bulk of paper work will be eliminated. 

1.5       Research Questions

The following research questions are designed to be examined in the course of this study, they are:

i.                    Have the introduction of Information Communication Technology improved the efficiency of trading on the floor of the Nigerian Stock Exchange?

ii.                  How has the introduction of Information Communication Technology affected the trading of stocks in the Nigerian Stock Exchange?

iii.                Is the Introduction of Information Communication Technology in the Nigerian Stock Exchange cost effective?

iv.                Is the Automated Trading System preferable to the Call-over Trading System on the trading of stocks in the Nigerian Stock Exchange after the introduction of Information Communication Technology?

1.6       Scope of the Study

This research work is on the Impact of Information Communication Technology on the trading of Nigerian Stocks Exchange started from September 2004 and seeks to cover the Central Securities Clearing System, Electronic Bonus, Trade Alert and the Automated Trading Systems of Nigerian Stock Exchange.

1.7       Limitation of the Study

A study of this nature cannot be complete without some hitches of which this particular one is no exception. The researcher faced set-backs in the area of finance, limited time, proximity, and adequate materials in the Nigerian Stock Exchange library (Kaduna Branch) and website.

1.8       Definition of Key Terms

Automated Trading System (ATS): This refers to trading quoted securities through computer terminal linked to a control server.

Common Stock Index: A complication showing the average current market value of common stock compared with their average market value at an earlier base period.

Call-Over Trading System (CTS): This is a manual procedure used by stock brokers to transact or trade share.

Computer: An electronic device for storing processing and receiving data according to instruction given i.e garbage-in garbage-out (GIGO).

Data Processing: The input, storage, manipulation and dissemination of information use sequence of mathematical and logical operations.

Deregulations: The removal of government rules and regulations and controls from some types of business activities.

Information Super Highway:  A means of rapid transfer of information in different firms

Information Communication Technology ICT: The study or use of system especially computers, telecommunications etc. for storing, retrieving and sending information.

Internet: An open intercommunication directly or globally publicity accessible network.

Liberalization: The act of making a system opens

Local Area Network (LAN): A system allowing several concentrations of computers and terminals with a local area to share resources.

Market Capitalization: The value of the stocks as determined by the market price of its issued and outstanding common stock.

Networking: The acts of using interconnected computers peripherals or terminals to communicate with each other.

Over the Counter: A largely unregulated market whereby geographically disperse traders are linked to one another via telecommunication system.

Short Selling: The sale of security that the seller has borrowed and most repay the trader.

Software: programs that tell the computer what operations to perform.

Stock Broker: An individual or firm engaged in the business of buying and selling securities for others.

Stock exchange: Is a place where stocks and shares are publicly bought and sold.

Telecommunications: The transmission of information via phone lines, cables, optical fibre wires etc.

Trade Alert: This is a mechanism used in avoiding unauthorized transactions from the Central Securities Clearing System of investor/shareholders.

Work-Processing: It’s a word processor software used on a computer for writing, editing, manipulating and printing.


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