Modupe Gbadeyanka
By Modupe Gbadeyanka
The launch of Exchange Traded Derivatives (ETDs) on the Nigerian Stock Exchange (NSE) is getting nearer and according to the NSE, the first set of equity-linked products will soon be introduced.
These products such as index-futures or single-stock futures/options will meet global financial structuring standards, allowing global and domestic investors and investment managers to appropriately hedge against downside risk, the exchange assured.
Business Post reports that recently, the NSE obtained an approval-in-principle from the Securities and Exchange Commission (SEC) for the registration of NG Clearing as a premier Central Counterparty Clearing House (CCP).
The NG Clearing is expected to play a key role in the financial market ecosystem by driving the safety and stability of Africa’s global marketplace through an efficient and timely settlement of derivative trades.
A statement from the NSE said the capital market players can expect NG Clearing to align with the highest standards of global best practices in delivering clearing and settlement services because it was established by key players in the Nigerian financial industry, including the exchange, Central Securities Clearing System (CSCS) and top-tiered banks.
Accordingly, the introduction of ETDs on the NSE will deepen Africa’s position in the global financial markets, as well as enhance liquidity and help mitigate against price, duration and other financial risks that may arise from sophisticated financial transactional activities, the statement further 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.
“We intend to deliver an unparalleled CCP experience for the African financial markets,” the chief executive of the NSE, Mr Oscar Onyema, noted.
The NSE has promised to continue its market-wide capacity building for global participants, noting that it has partnered with global investment banks, such as JPMorgan Chase, to facilitate in-depth capacity building programme on the derivatives market.
It added that in laying the groundwork to build a standardised derivatives market, the SEC and the Central Bank of Nigeria (CBN) have been brought in to establish the optimal regulatory and legal framework for derivatives in the Nigerian capital market.
