MARKET ARCHITECTURE, DISCLOSURE, AND THE LIQUIDITY OF UNLISTED PUBLIC SECURITIES: EVIDENCE FROM NASD OTC IN NIGERIA

Abstract

This study examines the market architecture for unlisted public securities in Nigeria. We analyze a distinct segment of the Nigerian capital market in which securities are publicly held and tradable on the NASD OTC Securities Exchange but are not listed on the Nigerian Exchange (NGX). Using institutional analysis and comparative evidence, we show that Nigerian regulation separates formal listing from supervised quotation and secondary-market trading. The Securities and Exchange Commission (SEC) requires securities of unlisted public companies to trade only on a Commission-approved OTC platform, while NASD supplies the disclosure, trading, surveillance, and settlement infrastructure for that segment. We document the admission pathways, continuing obligations, and trading arrangements that govern this market and compare them with the tiered U.S. OTC market and the United Kingdom’s distinction between the Official List and AIM. The evidence indicates that NASD operates as an intermediate market layer between private illiquidity and full exchange listing. More broadly, the findings suggest that market quality in off-exchange environments depends less on the absence of formal listing than on the strength of disclosure rules, regulatory oversight, and post-trade infrastructure. In the Nigerian setting, the main constraint appears to be incomplete migration of eligible issuers into the regulated OTC framework rather than the absence of an institutional design. The paper contributes to the literature on market design, disclosure regulation, and alternative trading venues by showing how a supervised OTC market can expand transparency and investor protection for unlisted public securities in an emerging market.