By Modupe Gbadeyanka
Former Chairman of the United States Commodities Futures Trading Commission (US CFTC), Mr James Stone, has highlighted the ‘Pluses and Pitfalls of Derivatives Trading’.
The financial expert was at the Nigerian Stock Exchange (NSE) last Thursday to deliver a lecture on the above topic.
The stock exchange plans to launch the Exchange Traded Derivatives (ETD) later this year and Mr Stone was invited to provide enriching perspectives and strengthen the capacity of capital market operators, who create value for investors through their operations on the NSE.
In his lecture, Mr Stone noted that derivatives did not cause the 2008 global financial crisis, however they contributed to exacerbating the situation as a result of synthetic derivatives; corruption; interconnectedness of financial institutions; flawed models that didn’t flag certain risks opaqueness of the market and sometimes lack of understanding with credit rating agencies.
He stated that for the derivatives market to be efficient, regulation is key, while everything else will have to be taken slow and learnt through manageable experiments.
To manage apprehension and anxiety about participating in derivatives products, Mr Stone advised market participants to begin with Exchange Traded Derivatives which offer a reliable platform for price discovery.
He added that participants should start small on all trading experiments and arm themselves by working for a sophisticated trader as well as spend time with experts.
On his part, chief executive of the stock exchange, Mr Oscar Onyema, explained that the seminar was packaged as part of the NSE’s commitment to build capacity and enhance the expertise of operators and investors towards a more efficient market.
“Therefore, the lecture on ‘Pluses and Pitfalls of Derivatives Trading’ delivered by Mr James Stone will provide enriching perspectives and strengthen the capacity of capital market operators, who create value for investors through their operations on the Nigeria Stock Exchange”.
Also speaking, Managing Director of Coronation Merchant Bank Group, a major player on the NSE, whose subsidiary, Coronation Asset Management, Mr Abubakar Jimoh, noted that “a collaborative approach to capacity building will unlock inherent value on the NSE.”
According to Mr Jimoh, “We are excited about our collaboration with the NSE on this noteworthy initiative, which will have positive effects on capital market operations in Nigeria.”
He stated that “as a wholesale financial institution focused on transforming the face of merchant banking in Africa, Coronation Merchant Bank is not only open to innovative collaborations that will bring development to the African financial landscape, but will serve as a catalyst for revitalizing capital market operations across the continent.”
At the end of his lecture, Mr Stone was honoured with a Closing Gong ceremony.
Adedapo Adesanya