NGX Launches West Africa’s first Exchange Derivatives Market

Nigerian Exchange launched West Africa’s first Exchange Traded Derivatives (ETD) Market with Equity Index Futures Contracts on 14 April 2022.

According to the exchange, this is consistent with its commitment to developing the Nigerian capital market by providing a market that thrives on innovation and responds to the needs of stakeholders in accessing and using capital.

The launch of NGX ETD Market saw the listing of two Equity Index Futures Contracts, NGX 30 Index Futures and NGX Pension Index Futures, with more securities to be added in the future. To promote clearing efficiency, stability, and confidence, the Exchange has collaborated with a premier Central Counterparty (CCP) in Nigeria, NG Clearing Limited, to provide the clearing infrastructure for NGX Derivatives Market and its clearing members – Access Bank and Zenith Bank. The ETDs Market will commence with trading activities by the first three Trading License Holders – Cardinal Stone Securities Limited, Meristem Securities Limited and APT Securities and Funds Limited – who have been cleared by NGX Regulation Limited to facilitate transactions on behalf of investors on NGX Derivatives Market.

Commenting on the launch, the Chief Executive Officer (CEO), NGX, Mr Temi Popoola, commended the efforts of stakeholders who have successfully driven the completion of the Derivatives Market since 2014.

“I would like to specially acknowledge the work that was done under the previous management of the Exchange, led by Mr Oscar Onyema,  whose contributions have formed the foundation of our present gains and accomplishments made manifest through the launch of NGX ETDs market. NGX remains committed to building an exchange that can cater to the increasingly sophisticated needs of domestic and foreign investors. A strong pillar in our strategy is to enhance liquidity and expand market capitalisation to the end that we create value for stakeholders, and the introduction of ETDs is a critical step in the right direction. The platform will play an essential role in broadening and deepening the market, adding new impetus to NGX’s leading position as Africa’s preferred exchange hub,” he said.

“Our partnership with best in class Central Counterparty, NG Clearing Limited, further engenders confidence in the ETDs market segment amongst market participants, as the clearing infrastructure is capable of reducing systemic risk and enhancing market transparency”, he added.

On his part, Mr Tapas Das, Chief Executive Officer of NG Clearing, said, “The launch of the derivatives market in Nigeria is a testament to the maturity of our market, a sign that the market has come of age and is ready to transition into a new era. The risks that come with the derivatives market will be managed through NG Clearings’ robust technology-enabled Clearing and Settlement, Collateral Management, and Risk Management offerings as a critical Central Counter Party (CCP) Financial Market infrastructure (FMI).”

ETDs are standardised, highly regulated, and transparent financial contracts listed and traded on a securities exchange, and guaranteed against default through the clearinghouse of the derivatives exchange. NGX ETDs market will complement existing asset classes, provide investors and other market players with the necessary tools for tactical asset allocation, as well as improve risk and cost management for effective portfolio management. It will further enhance the participation of domestic and international investors in Nigeria’s financial markets, which will positively impact the performance of the economy.