Investors in the global capital markets can expect the launch of West Africa’s first Exchange Traded Derivatives (ETDs) on The Nigerian Stock Exchange (NSE or The Exchange) in the near term following the registration of NG Clearing by the Securities and Exchange Commission (SEC) as a premier Central Counterparty Clearing House (CCP). The approval-in-principle will allow The Exchange to launch ETDs supported by NG Clearing in the risk management process.
Set up by key players in the Nigerian financial industry including NSE, Central Securities Clearing System (CSCS) and top-tiered banks, NG Clearing will play a key role in the financial market ecosystem by driving the safety and stability of Africa’s global marketplace through efficient and timely settlement of derivative trades. Associated with a member exchange of the World Federation of Exchanges (WFE), capital market players can expect NG Clearing to align with the highest standards of global best practices in delivering clearing and settlement services.
Speaking on the development, the Chief Executive Officer, NSE and Chairman, NG Clearing, Mr. Oscar N. Onyema, stated, “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.” 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 Exchange, the leading securities Exchange in West Africa with global memberships in the likes of WFE, IOSCO, ISG, will introduce the first set of equity-linked products such as index-futures or single-stock futures/options that meet global financial structuring standards allowing global & domestics investors and investment managers to appropriately hedge against downside risk. In laying the groundwork to build a standardized derivatives market, NSE has worked with SEC and the Central Bank of Nigeria (CBN) to establish the optimal regulatory and legal framework for derivatives in the Nigerian capital market. In addition, NSE has partnered with global investment banks, such as JPMorgan Chase, to facilitate in-depth capacity building programme on the derivatives market.
Leading up to the launch of ETDs, the Exchange will issue its first set of trading licenses in over 20 years as it continually welcomes and onboards trading/clearing members. The NSE will also continue market-wide capacity building for global participants, including the recently held virtual workshop with the theme, Adopting Derivatives During Stressed Market Conditions and the Legal and Regulatory Requirements of Derivatives Trading for Capital Market.