Nigeria to launch West Africa’s first exchange-traded derivatives

Arrangements are ongoing to launch West Africa’s first Exchange Traded Derivatives (ETDs) on the Nigerian stock market.

Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC), has granted approval-in-principle to two central counterparty clearing houses (CCP), NG Clearing and FMDQ Clear.

The Nigerian Stock Exchange (NSE), the major promoter of NG Clearing, stated that the approval-in-principle will allow it to launch ETDs, to be supported by NG Clearing in the risk management process.

According to the Exchange, 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.

Chief Executive Officer, Nigerian Stock Exchange (NSE) and Chairman, NG Clearing, Mr. Oscar Onyema, said with NG Clearing’s association 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.

“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,” Onyema said.

Onyema explained that in laying the groundwork to build a standardised 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.