Document Title: Error Trade and Error Limit Policy

Version: v2.0

Original Approval Reference: December 16, 2025

A. Purpose

The purpose of this policy is to document the procedure for handling trade errors as soon as they come to our attention with a view to take appropriate corrective measures with the paramount aim of protecting our clients and without any loss to them. This Policy is designed to ensure full compliance with NGX Rules, promote market integrity, protect clients, and minimize operational and financial risks arising from trading errors.

B. Definitions

Erroneous trade is a stock transaction that deviates from client’s mandate. Erroneous trades could be caused by computer malfunctions or human error.

C. Types of Trade Errors

Some common types of trade errors include but not limited to the following:

  • Buying wrong security;
  • Buying security at wrong amount;
  • Trading in the wrong client account;
  • Trading in the wrong direction (buy vs. sell);
  • Trading at the wrong price (limit orders, etc);
  • Violation of client account restriction;
  • Violation of client account suitability;
  • Delayed execution of trade instructions;
  • Duplicate execution of trade instructions;
  • ETC

D. Managing Error Principles

  • Any inappropriate trade determined before settlement must be reversed immediately without any loss to the client and must be reported to the client and regulator;
  • A properly executed trade but wrongly documented (e.g: allocation to a wrong account) should be corrected immediately with management approval;
  • The employee who discovers trade error must report the ‘error’ to the Managing Director and the Compliance Manager;
  • All errors should be reported to the Compliance Manager immediately on discovery, even where there is uncertainty as to whether the incidence constitutes trading error;
  • The Compliance Manager should ascertain very quickly the pertinent facts and determine whether the reported incidence constitutes a trading error;
  • The Compliance Manager should determine whether the error is covered under the firm’s Fidelity Guarantee Insurance policy and at what stage the relevant insurance company should be informed;

E. Error Management General Principle

As a general principle clients should not bear any loss as a result of the trading error.

Losses may include:

  • Any amount incurred on reversing the trade including incidental charges like brokerage commission, regulatory charges, etc;
  • Deterioration in the value of stocks.

F. Record in an Error Account (Mandatory)

Every error trade must be captured in a dedicated:

  • General Ledger Error Account

This account:

  • Separates error trades from normal client/business activity
  • Tracks financial impact (profit or loss)
  • Records all correction transactions

G. Maintaining a Detailed Error Trade Register

For each error trade, NGX expects the following minimum details:

  • Security name
  • Quantity traded
  • Price executed
  • Time of execution
  • Dealer/Trader responsible
  • Nature of the error (e.g., wrong price, wrong stock)
  • Cause of the error (human/system)
  • Financial impact (profit or loss)
  • Method of resolution
  • Date of resolution

H. Regulatory Reporting Thresholds Rule 12.2(e): General Error Ledger Accounts

You must report to NGX when:

A single error trade results in ≥ ₦50,000 loss or profit, OR

Weekly cumulative error trades exceed ₦500,000

Reporting is typically:

Quarterly, or

Immediately, if material or requested by NGX.

HOW TO RESOLVE AN ERROR TRADE (NGX APPROVED METHODS)

a. Client Acceptance

The client agrees to keep the trade as executed

No further correction required

This only applies when the error is minor or the Client is not negatively impacted.

b. Financial Compensation (“Difference Payment”)

The Firm compensates the client for any loss caused by the error

Example:

Client intended to buy at ₦10 but was executed at ₦12

Firm pays the ₦2 difference.

c. Offset (Reversal) Trade

The Firm executes a counter-trade in the market to neutralize the position

Example: Wrong purchase → sell back immediately

Most common operational fix, Loss/Profit goes to the Firm’s Error account

In Conclusion

The error trade remediation must be done within 24 hours. The purpose of this policy is for

1. Transparency

Every error must be:

  • Recorded
  • Traceable
  • Justifiable

2. Client Protection

  • Clients should not suffer from dealer mistakes
  • Compensation must be fair and documented

3. Accountability

  • Errors are tied to specific traders and systems
  • Firms must show control and supervision

 

Approved and Authorised

MANAGING DIRECTOR

CHAIRMAN