June 26, (THEWILL) – FMDQ Securities Exchange Limited is set to provide a long-awaited panacea to the Nigerian financial markets, with the introduction of its dynamic Exchange-Traded Derivatives (ETD) market, on Wednesday, July 12, 2023.
The trailblazing 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.
The stage is, therefore, set for the go-live of the FMDQ ETD market, the biggest innovation to yet arise from the stables of the FMDQ franchise, following the launch of the Naira-Settled OTC FX Futures by CBN and FMDQ in 2016, which was instrumental in minimising the disequilibrium in the FX market, whilst attracting significant inflows into the Nigerian fixed income and equity markets.
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.
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, as 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.
It is on this premise that FMDQ Securities Exchange Limited, in keeping with its mandate to advance economic progress by championing laudable market development initiatives in the Nigerian financial markets, activated the FMDQ Derivatives Market Project. Commencing as a feasibility study in 2015.
The Project was set up with the aim to launch Nigeria’s most dynamic Exchange-Traded Derivatives Market, in collaboration with market stakeholders; thereby introducing exchange-traded risk hedging products to the Nigerian financial markets, as is obtainable in other developing and developed financial markets globally.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
