What Is a Stock Exchange and How Does the NGX Work? Brokers, CSCS, the SEC and the Path of an Order

A stock exchange is an organised, regulated marketplace where the shares of listed companies are bought and sold through licensed brokers at prices set by matching buy and sell orders. In Nigeria the exchange for listed equities is Nigerian Exchange Limited, known as the NGX, which operates the market, publishes its prices and sets the rules companies and brokers trade under, within the oversight of the Securities and Exchange Commission (SEC). The exchange does not own the shares, does not hold your money and does not advise you; it is the venue and the rulebook.

What an Exchange Does

• Listing: it admits companies that meet its standards to have their shares traded, and holds them to continuing obligations such as publishing results and announcing corporate actions.
• Trading: it runs the electronic order book where brokers' buy and sell orders are matched during the trading session.
• Price discovery: the prices at which orders match become the published prices the whole market refers to, including the Daily Official List and the All-Share Index.
• Information: it publishes company announcements, prices and statistics so that all participants see the same facts at the same time.
• Rules and surveillance: it sets trading rules, such as the daily price limit, and monitors the market for breaches.

From the Nigerian Stock Exchange to NGX Group

The market began as the Lagos Stock Exchange in 1960 and became the Nigerian Stock Exchange in 1977, run as a not-for-profit body owned by its members, the stockbroking firms. In 2021 it demutualised, becoming a shareholder-owned company, and the business was reorganised into a holding company with three wholly owned operating subsidiaries. The names look alike and are easy to confuse:

• Nigerian Exchange Group Plc (NGX Group) is the holding company. It is itself listed on the exchange it owns, so it has shareholders and publishes its own results.
• Nigerian Exchange Limited (NGX, or NGX Exchange) is the operating exchange: the listing platform, the trading system and the market data service. When people say "the NGX" they mean this company.
• NGX Regulation Limited (NGX RegCo) is the independent regulation company. It enforces the listing and trading rules against listed companies and dealing members, separately from the commercial business of running the market.
• NGX Real Estate Limited (NGX RelCo) manages the group's property.

Who Does What Around the Exchange

• The Securities and Exchange Commission (SEC) is the apex regulator of the Nigerian capital market under the Investments and Securities Act 2025. It registers exchanges, brokers, registrars, fund managers and other operators, approves public offers and handles investor complaints that the exchange cannot resolve.
• Stockbrokers, called dealing members of the NGX, are the only firms permitted to enter orders into the exchange's trading system. Every investor trades through one, whether directly or through a platform that uses one. A broker must be SEC-registered and an NGX dealing member.
• The Central Securities Clearing System (CSCS) is the depository, clearing house and settlement system. It holds every listed share in electronic form under each investor's Clearing House Number (CHN), moves shares and money between buyer and seller when a trade settles, and issues the statement that shows what you own.
• Registrars are appointed by each listed company to keep its register of members, pay its dividends and administer its corporate actions. The register is built from the settled positions at CSCS.
• Listed companies issue the shares, publish the results and declare the dividends and other actions that the exchange announces.
• Other markets sit alongside the NGX: the NASD OTC market for unlisted public company shares, and FMDQ for bonds, money market instruments and foreign exchange.

How an Order Becomes a Holding

1. You open an account with an SEC-registered stockbroker, which opens or links a CSCS account under your CHN. Your identity is verified and your bank account is recorded.
2. You fund the account and give the broker an order: which company, how many shares, and whether to buy at the market price or at a limit you set.
3. The broker enters the order into the NGX trading system. Equities trade from 9:00 to 16:00 WAT, and the system matches orders by price and then by time of arrival. A price cannot move more than ten per cent above or below the previous close in one day.
4. When your order matches a sell order, the trade is executed at that price. The broker sends you a contract note recording the quantity, price, charges and settlement date.
5. On the next business day, T+1, CSCS settles the trade: the shares move from the seller's CHN to yours and the money moves the other way.
6. The shares now appear on your CSCS statement under your name. The company's registrar picks up the change of ownership from CSCS, so dividends and notices come to you.

Selling reverses the same path: the broker enters the sell order, the trade matches, CSCS delivers the shares out of your account on T+1 and the broker pays you the proceeds less charges.

How the NGX Works: FAQs

Can I buy shares directly from the NGX?

No. Only dealing members can enter orders into the trading system. Every investor, including a company buying back its own shares, trades through a stockbroker.

Who sets the price of a share?

Buyers and sellers do, through the orders they place. The exchange publishes the price at which orders matched and applies its rules on minimum quantities and daily limits, but it does not decide what a share is worth.

What is the difference between the NGX and the SEC?

The NGX is a company that operates a market and regulates its own participants through NGX RegCo. The SEC is the government agency that regulates the entire capital market, including the NGX itself, and licenses everyone who operates in it.

What protects me if my broker fails to deliver?

Settlement is carried out by CSCS under rules that require the broker to deliver shares or funds on the settlement date. The NGX maintains arrangements to cover a settlement failure by a dealing member, and an Investors' Protection Fund for losses caused by a dealing member's insolvency or misconduct. Those protections have limits and conditions, which the NGX and SEC publish; they do not protect against a fall in the price of a share.

Is NGX Group the same as the exchange?

No. NGX Group Plc is the listed holding company. Nigerian Exchange Limited, its subsidiary, is the exchange on which shares trade.