T+1: SEC sets 5:00pm cut-off for equities, commodities

The Securities and Exchange Commission (SEC) has fixed 5:00 p.m. on the first business day after a transaction (T+1) as the settlement deadline for equities and commodities traded and settled through the Central Securities Clearing System (CSCS), tightening compliance requirements under Nigeria’s new shorter settlement cycle.

The Commission, in a circular issued Wednesday to capital market operators and other market participants, said all transactions in the affected securities must be fully paid by 5:00 p.m. on T+1 to comply with the standard Delivery versus Payment (DvP) settlement procedure.

The clarification is expected to provide greater certainty to market participants following Nigeria’s transition from the T+2 to the T+1 settlement cycle, which requires eligible securities transactions to be completed one business day after the trade date.

The SEC warned that where a broker/dealer’s trading account is not adequately funded to meet its settlement obligation within the prescribed timeframe, the default would be handled in accordance with the CSCS Default Management Procedure and applicable transaction settlement guidelines of the relevant exchange.

The Commission also clarified the funding requirements applicable to foreign portfolio investors, stating that they are not required to prefund their accounts for trades in the Nigerian capital market.

However, it stressed that capital market operators facilitating transactions on behalf of foreign portfolio investors must establish and maintain appropriate controls and processes to ensure that trades are funded and settlements completed within the prescribed timeframe.

The latest directive follows the Commission’s earlier circular on the implementation of the T+2 settlement cycle for equities transactions, issued on June 3, 2025, and the subsequent circular on the transition to T+1 settlement, issued on May 15, 2026.

Under the T+1 regime, trades executed on a particular business day must be settled on the following business day, significantly reducing the period between trade execution and final settlement.

The SEC said the transition represents a significant milestone in its efforts to create a more efficient, resilient and internationally aligned trading and post-trade environment.

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It noted that the shorter settlement cycle is expected to improve settlement efficiency, reduce counterparty risk and enhance liquidity in the Nigerian capital market.

The reform is also expected to strengthen the competitiveness of Nigeria’s capital market by bringing its settlement infrastructure closer to international standards, while improving the market’s appeal to domestic and foreign investors.

Market operators will therefore be required to strengthen their internal funding, reconciliation and settlement processes to ensure that obligations are met before the 5:00 p.m. T+1 deadline.

The SEC’s clarification effectively places greater emphasis on timely settlement discipline, with failures to meet funding obligations potentially triggering the applicable default management procedures.

The Commission said the reforms would ultimately contribute to a safer and more efficient market and enhance the attractiveness of Nigeria’s capital market to both domestic and international investors.