SEC approves CCCP to hedge against risks
NG Clearing Limited has secured approval in principle from the Securities and Exchange Commission (SEC), to launch clearing and settlement of Exchange-traded derivative products as Nigeria’s premier Central Counterparty Clearing House (CCCP).
Exchange-traded derivatives are products listed for trading on public exchanges, and consist mostly of options and future contracts, compared to over-the-counter (OTC) derivatives like credit-default swaps that are traded privately.
NG Clearing’s role as a CCP in Nigeria’s financial ecosystem is to ensure safety of the market by managing counterparty credit risk, which in turn, reduces systemic risk in the local bourse by guaranteeing settlement of trades. NG Clearing is Nigeria’s first CCP, providing clearing and settlement of Exchange-traded derivative instruments in the market.
Speaking about NG Clearing, the Board Chairman, Oscar N. Onyema, said: “Our main role is to improve the safety of our financial market by delivering best-in-class, post-trade services that manage counterparty credit risk and reduce systemic risk.
“To mitigate these credit risks in an efficient and robust manner, we will interpose ourselves as a guarantor to both parties in a transaction, thus ensuring the successful execution of derivatives and other trades from various trade points in Nigeria. We intend to deliver an unparalleled CCP experience for the Nigerian financial market.”
According to him, the company will optimise deployment of its resources to achieve long-term value creation for its stakeholders’ using a state-of-the-art risk management framework, which complies with global best practices for mitigating settlement risk. He said the risk-based additional collateral requirement would ensure that capital deployed by clearing members is always optimal.
“The company intends to deploy a competitive low-cost clearing fee regime for members. The company has sufficient financial resources, including a settlement guarantee fund, to cover participants’ risk exposures. Members will have access to a wide range of financial reports that equip them with extensive knowledge and enable them to make informed decisions.”
On the company’s objective, the Managing Director, Tapas Das, said: “NG Clearing shall be playing a key role in the financial market ecosystem in the region, upholding stability and safety of the marketplace, through efficient and timely settlement of derivative trades.
“The aim is to strengthen the country’s investment environment through solutions that systematically reduce risks, enhance operating efficiency, and minimize costs for all market participants, thereby serving as a catalyst to national development.”
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