FMDQ Securities Exchange Limited, a wholly owned subsidiary of FMDQ Group PLC, with the support of the Securities and Exchange Commission (SEC), the Central Bank of Nigeria (CBN), FMDQ Clear Limited, and key market participants, is set to launch its dynamic Exchange-Traded Derivatives (ETD) market, July 12.
The Exchange said in a statement that its FMDQ ETD market will go-live with three products – the Federal Government of Nigeria Bond Futures, Treasury Bills Futures, and Open Market Operation Bills Futures.
“It is strongly envisaged that these products will deliver the dividends of a derivatives markets by serving as useful risk management tools, supporting price discovery, competitiveness, and market efficiency, which in turn will help attract capital flows, reduce cost of capital, promote secondary market liquidity, and ultimately deepen the Nigerian financial markets,” it said.
It is strongly envisaged that these products will deliver the dividends of a derivatives market by serving as useful risk management tools, supporting price discovery, competitiveness, and market efficiency…
FMDQ also noted that globally, financial markets are plagued with heightened price volatility, fluctuating market prices/rates, and constant uncertainty of macroeconomic indicators, with the Nigerian financial markets not faring any better.
“To counter and assuage these adverse effects, robust and efficient risk management tools, such as derivatives are typically employed,” it added.
It continued that “Whilst model markets have been able to harness the potential of the derivatives markets to mitigate risk efficiently, diversify investment portfolios, and allow businesses pursue expansion with higher risk in a safe manner, the reverse is the case in emerging and frontier markets, such as Nigeria.”
It explained that this is because derivatives markets are non-existent or small – with dearth of derivatives products – at best, and hedging costs are high, making it uninteresting for market participants.
Against this backdrop, the Exchange said it activated the FMDQ Derivatives Market project, which feasibility commenced in 2015, to introduce exchange-traded risk hedging products to the Nigerian financial markets, as is obtainable in other developing and developed financial markets globally.
While acknowledging the susceptibility of the Nigerian financial markets and the broader economy to external shocks, FMDQ envisages that the combined strength and resilience of the people and markets, coupled with the launch of the FMDQ ETD market, will propel the Nigerian financial markets towards a trajectory of growth and progress.
