FMDQ Exchange Launches Derivatives Market

FMDQ Group Plc has unveiled its Exchange-Traded Derivatives Market to enable investors hedge their inherent financial market risks.

The exchange, in a statement on Tuesday, said the introduction of a derivatives market would provide an opportunity for investors and market operators to convert risk to financial security, which in turn would help attract capital flows, and reduce the cost of capital.

It said the new market would promote market liquidity, and ultimately deepen the Nigerian financial markets.

The statement read, “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 in Nigeria.

“Driven by FMDQ Securities Exchange Limited (FMDQ Exchange or the Exchange), Nigeria’s largest Exchange by turnover, in collaboration with FMDQ Clear Limited (FMDQ Clear or the Central Counterparty ([CCP]), Nigeria’s foremost CCP, the FMDQ ETD Market, boasts of participation from 10 pioneer Deposit Money Banks and five pioneer non-bank financial institutions, all positioned to change the landscape of the Nigerian financial markets in the near-to-medium term.”

According to the Exchange, with the CCP’s extensive risk management structures and robust financial resources – c. $20m in FMDQ Clear’s proprietary Default Resolution Reserve, and over $12m from members’ contributions to the CCP’s default waterfall, the players would be able to leverage the financial capacity of the very big players in a market structure that transferred counterparty risks to a credible world-class CCP, FMDQ Clear.

It said in support of the ETD Market, the three pioneer General Clearing Members – Access Bank Plc, Zenith Bank Plc, and Stanbic IBTC Bank Plc which were capable of clearing transactions for their proprietary positions and those of other trading members and clients, would share mutualised responsibility as members of the CCP, and clear their proprietary positions, as well as 12 Derivatives Trading Members, bringing the pioneer Trading Members in the ETD Market to 15.

The members were Meristem Stockbrokers Limited, CardinalStone Securities Limited, Chapel Hill Denham Securities Limited, Coronation Merchant Bank Limited, Union Bank of Nigeria Plc, Parthian Securities Limited, DLM Securities Limited, 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.