EFEMS: CBN sets new guidelines for FX trading

The Central Bank of Nigeria (CBN) on Wednesday announced new guidelines for foreign exchange (FX) trading through the Electronic Foreign Exchange Matching System (EFEMS).

CBN’s director of the Financial Markets Department, Omolara Duke, made this in a statement, stating that the new guidelines aim to ensure transparency, fairness, and compliance in FX trading.

The minimum tradable amount is set at $100,000; CBN disclosed this in a tweet, adding it will be effective December 2, 2024.

“The CBN transitions FX trading to Bloomberg BMatch, promising enhanced transparency, fair pricing and operational efficiency, effective December 2, 2024,” the apex bank tweeted.

CBN also stated that the Bloomberg BMatch platform will boost market integrity, enhance price discovery, and ensure seamless FX trading among participants.

General Provisions
1. These guidelines regulate the operations of interbank FX trading via the Electronic Foreign Exchange Matching System (EFEMS),

2. The purpose is to ensure transparent, fair, and efficient FX trading, minimising counterparty risk and ensuring compliance with Central Bank of Nigeria (CBN) regulations. and greater

3. The CBN has approved the Bloomberg BMatch as the designated platform to support the EFEMS for interbank trading. advised to

4. All market participants are required to comply strictly with these guidelines and any amendments as may be issued by the CBN from time to time.

Trading and Operational Requirements
1 Trading hours shall be from 09:00 hrs to 16:00 hrs WAT on business days.

2 All unmatched orders will be cleared at the market’s close and may be resubmitted on the following business day.

3 Quotes on EFEMS will remain anonymous until matched. Once matched, counterparty details will be revealed for settlement purposes.

4 All trades consummated on EFEMS are binding unless cancelled by mutual agreement of both parties with written approval from the CBN.

5 The minimum tradable amount is $100,000.00, with incremental clip sizes of $50,000.00.

6 Participants must set credit and settlement limits for other counterparties in the system.
Transactions exceeding these limits will not be executed.

7 Participants must have adequate credit and settlement limit set for the CBN as its counterparty bank.

8 Participants are required to comply with the Nigerian Foreign Exchange Code and other CBN regulations.

9 EFEMS shall be used exclusively for executing spot FX transactions involving the Nigerian Naira (NGN) against the United States Dollar (USD). Other currency pairs may be introduced upon the CBN’s directive.

10 Transactions on EFEMS must be settled through approved settlement systems, with participants
bearing responsibility for their obligations.

1 The platform provider must offer real-time support to address system issues. In the event of prolonged downtime, alternative trading protocols will be activated as prescribed by the CBN.

12 Any participant defaulting on settlement obligations will face penalties as determined by the CBN.

Governance and Data Reporting

1 The CBN shall monitor all transactions on EFEMS to ensure market integrity and transparency.

2 Participants must submit daily transaction reports only to the CBN, detailing trade volumes, counterparties, and settlement status. All whole/interbank trades conducted between Authorised Dealers and non-banks participants on telephone and other acceptable channels in the market must be confirmed on the RFQ and reported on EFEMS immediately. Any deal that falls outside the EFEMS parameters, such as same day or next day settlements delivery vs payment transactions where limits are exceeded and deals with non-standard amount should be booked via the RFQ functionality and uploaded automatically to the FX blotter not more than 10 minutes after the completion of the trade.

3 All trade data generated on EFEMS shall be owned by the CBN. The CBN reserves the right to publish aggregated or disaggregated data for market analysis, subject to confidentiality agreements.

4 The CBN reserves the right to review EFEMS operations, including participant activities and system efficiency, periodically.

5 Violations of these guidelines or other applicable regulations shall attract penalties, including suspension or revocation of EFEMS access rights.