FMDQ introduces exchange-traded derivatives market
Today marks yet another significant milestone in the Nigerian financial markets as FMDQ Securities Exchange Limited and FMDQ Clear Limited, wholly owned subsidiaries of FMDQ Group PLC, with the support of the Securities and Exchange Commission, the Central Bank of Nigeria, and the Debt Management Office, Nigeria, go live with the introduction of the dynamic FMDQ Exchange-Traded Derivatives (ETD) Market, making it possible for market stakeholders – corporates, foreign & domestic investors and pension fund administrators – to hedge inherent financial market risks in their operational and investment activities, providing an opportunity to convert risk to financial security, which in turn will help attract capital flows, reduce cost of capital, promote market liquidity, and ultimately deepen the Nigerian financial markets. The long-awaited FMDQ ETD market, which is geared towards transforming risk to certainty, in an unprecedented move, brings about the integration of the banking sector and capital market in Nigeria.
Driven by FMDQ Securities Exchange Limited (FMDQ Exchange or the Exchange), Nigeria’s largest Exchange by Turnover, in collaboration with FMDQ Clear Limited (FMDQ Clear or the Central Counterparty ([CCP]), Nigeria’s foremost CCP, the FMDQ ETD Market, boasts of participation from ten (10) pioneer Deposit Money Banks and five (5) pioneer non-bank financial institutions, all positioned to change the landscape of the Nigerian financial markets in the near-to-medium term. With the CCP’s extensive risk management structures and robust financial resources – c. $20mm in FMDQ Clear’s proprietary Default Resolution Reserve, and over $12mm from Members’ contributions to the CCP’s default waterfall – the players will be able to leverage the financial capacity of the very big players in a market structure that transfers counterparty risks to a credible world-class CCP, FMDQ Clear.
In support of the ETD Market, the three pioneer General Clearing Members (GCMs) – Access Bank PLC, Zenith Bank PLC, and Stanbic IBTC Bank PLC – who are capable of clearing transactions for their proprietary positions and those of other Trading Members and clients, will share mutualised responsibility as Members of the CCP, and clear their proprietary positions, as well as twelve (12) Derivatives Trading Members, bringing the pioneer Trading Members in the ETD Market to fifteen (15) – Meristem Stockbrokers Limited, CardinalStone Securities Limited, Chapel Hill Denham Securities Limited, Coronation Merchant Bank Limited, Union Bank of Nigeria PLC, Parthian Securities Limited, DLM Securities Limited, FBNQuest Merchant Bank Limited, First City Monument Bank Limited, Fidelity Bank PLC, FSDH Merchant Bank Limited, Greenwich Merchant Bank Limited, Access Bank PLC, Zenith Bank PLC and Stanbic IBTC Bank PLC. The ETD Market goes live with two pioneer products – the FGN Bond Futures and USD-NGN NonDeliverable FX Futures – which will be traded and cleared on world-class FMDQ ETD systems, the FMDQ Q-ex Trading System and FMDQ Q-ex Clearing System, respectively.
The development of this ETD Market in Nigeria has long been a topic of interest amongst capital market operators, regulators, and market participants, as the Market directly plays a vital role in financial system stability and greatly contributes to various aspects of the economy as a whole. Leveraging on its aspiration to transform the Nigerian financial markets to be globally competitive, operationally excellent, liquid, and diverse, in line with the FMDQ ‘GOLD’ Agenda, the pre-eminence of the FMDQ ETD Market cannot be overemphasised as it ushers the actualisation of the panacea that will enable the development of a thriving financial sector, like other developed economies, positioning it for revolutionary growth in potentially colossal proportions.
The visionary pioneer Members of this FMDQ ETD Market, who have positioned themselves to take advantage of the emerging novel segment of the financial markets, must be commended for their instrumental role in driving the activation of this Market and the broader Nigerian financial markets. These pioneer Members have demonstrated their commitment as catalysts in fostering sustained growth and development in the Country’s financial landscape.
FMDQ Group is Africa’s first vertically integrated financial market infrastructure (FMI) group, strategically positioned to provide registration, listing, quotation and noting services; integrated trading, clearing & central counterparty, settlement, and risk management for financial market transactions; depository of securities, as well as data and information services, across the debt capital, foreign exchange, equity and derivatives markets, through its wholly owned subsidiaries – FMDQ Exchange, FMDQ Clear, FMDQ Depository Limited and FMDQ Private Markets Limited. As a sustainability-focused FMI group, FMDQ Group, through FMDQ Exchange, operates Africa’s premier Green Exchange –FMDQ Green Exchange – positioned to lead the transition towards a sustainable future.
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