Risks Hedging: FMDQ Exchange-Traded Derivatives Market Goes Live
In a strategic move to create a market for hedging capital market risks, FMDQ Group has announced that its exchange-traded derivatives platform has gone live, a development that marks yet another significant milestone in Nigeria.
According to a statement, the derivative trading platform goes live to make 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.
FMDQ said the derivative market provides an opportunity to convert risk to financial security, which in turn will help attract capital flows, reduce the 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, it said.
Supported by FMDQ Securities Exchange Limited, Nigeria’s largest Exchange by turnover, in collaboration with the Central Counterparty (CCP), the FMDQ ETD Market boasts of participation from ten pioneer Deposit Money Banks and five pioneer non-bank financial institutions.
With extensive risk management structures and robust financial resources of about $20 million in FMDQ Clear’s proprietary Default Resolution Reserve, and over $12 million 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.
In support of the ETD Market, the three pioneer General Clearing Members – 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, the statement reads.
This includes other twelve Derivatives Trading Members, bringing the pioneer Trading Members in the ETD Market to fifteen.
They are Meristem Stockbrokers Limited, CardinalStone Securities Limited, Chapel Hill Denham Securities Limited, Coronation Merchant Bank Limited, Union Bank of Nigeria PLC, Parthian Securities Limited, and DLM Securities Limited.
Others are 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 Non-Deliverable 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”, the statement reads. Risks Hedging: FMDQ Exchange-Traded Derivatives Market Goes Live
