Nigeria Exchange lunches West Africa’s First Trade Derivatives

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CEM REPORT | Nigeria Exchange Limited (NGX) has announced the launch of its Traded Derivatives (ETD) Market with Equity Index Futures Contracts.

The Exchange which made this known in a statement published on its website 0n the 14th of April 2022, noted the initiative was the First in West Africa.

The statement also added that the move “is consistent with the Exchange’s commitment to develop the Nigerian capital market by providing a market that thrives on innovation and responds to the needs of stakeholders in accessing and using capital.”

The NGX ETD launched with two Equity Index Futures Contracts, NGX 30 Index Futures and NGX Pension Index Futures, with more securities to be added in the future.

NGX said it has also collaborated with premier Central Counterparty (CCP) in Nigeria, NG Clearing Limited, to provide the clearing infrastructure for its Derivatives Market and its clearing members – Access Bank and Zenith Bank, promoting clearing efficiency, stability, and confidence.

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Mr. Temi Popoola, Chief Executive Officer (CEO), NGX, said,

“Our partnership with best in class Central Counterparty, NG Clearing Limited, further engenders confidence in the ETDs market segment amongst market participants, as the clearing infrastructure is capable of reducing systemic risk and enhancing market transparency

The Exchange said the ETDs Market trading activities will commence trading with the first three Trading License Holders – Cardinal Stone Securities Limited, Meristem Securities Limited and APT Securities and Funds Limited – who have since been cleared by NGX Regulation Limited to facilitate transactions on behalf of investors on NGX Derivatives Market.

Mr. Temi Popoola, Chief Executive Officer (CEO), NGX, also commended the efforts of stakeholders who have successfully driven the completion of the Derivatives Market since 2014.

“I would like to specially acknowledge the work that was done under the previous management of the Exchange, led by Mr. Oscar N. Onyema OON, whose contributions have formed the foundation of our present gains and accomplishments made manifest through the launch of NGX ETDs market. NGX remains committed to building an exchange that can cater to the increasingly sophisticated needs of domestic and foreign investors. A strong pillar in our strategy is to enhance liquidity and expand market capitalisation to the end that we create value for stakeholders, and the introduction of ETDs is a critical step in the right direction. The platform will play an essential role in broadening and deepening the market, adding new impetus to NGX’s leading position as Africa’s preferred exchange hub.” he said.

Chief Executive Officer NG Clearing, Mr Tapas Das, commenting said,

“The launch of the derivatives market in Nigeria is a testament to the maturity of our market, a sign that the market has come of age and is ready to transition into a new era. The risks that come with the derivatives market will be managed through NG Clearings’ robust technology-enabled Clearing and Settlement, Collateral Management, and Risk Management offerings as a critical Central Counter Party (CCP) Financial Market infrastructure (FMI)”.

NGX ETDs market will complement existing asset classes, provide investors and other market players with the necessary tools for tactical asset allocation, as well as improve risk and cost management for effective portfolio management. It will further enhance the participation of domestic and international investors in Nigeria’s financial markets, which will positively impact the performance of the economy.

ETDs are standardised, highly regulated, and transparent financial contracts listed and traded on a securities exchange, and guaranteed against default through the clearing house of the derivatives exchange.

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