NGX Launches Exchange Traded Derivatives Market Excitement

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NGX Launches Exchange Traded Derivatives Market Excitement
NGX Launches Exchange Traded Derivatives Market Excitement

The atmosphere at the Nigerian Exchange (NGX) Limited on Customs Street in Lagos is electric, and the reason is simple.

Today, Thursday, April 14, 2022, the local bourse will launch the first Exchange Traded Derivatives (ETD) market in West Africa, with Equity Index Futures Contracts.
The NGX ETD market debuted with the listing of two Equity Index Futures Contracts: NGX 30 Index Futures and NGX Pension Index Futures, with more securities to follow.

To promote clearing efficiency, stability, and confidence, the exchange has partnered with NG Clearing Limited, a premier Central Counterparty (CCP) in Nigeria, to provide clearing infrastructure for the NGX Derivatives Market and its clearing members, Access Bank and Zenith Bank.

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 the NGX Derivatives Market will begin trading activities in the ETDs market.

The NGX’s development is consistent with its commitment to developing the Nigerian capital market by providing a market that thrives on innovation and responds to stakeholders’ needs in accessing and using capital.

Mr Temi Popoola, CEO of NGX, praised the efforts of stakeholders who have successfully driven the completion of the derivatives market since 2014.

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“I would like to express my gratitude to the previous management of the Exchange, led by Mr Oscar Onyema, whose contributions laid the groundwork for our current gains and accomplishments made visible through the launch of the NGX ETDs market.” NGX remains committed to developing an exchange capable of meeting the increasingly sophisticated needs of domestic and foreign investors.

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“A key pillar of our strategy is to increase liquidity and market capitalisation in order to create value for stakeholders, and the introduction of ETDs is a critical step in the right direction.”

“The platform will be critical in broadening and deepening the market, providing new impetus to NGX’s leading position as Africa’s preferred exchange hub.”

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

“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,” said Mr Tapas Das, Chief Executive Officer of NG Clearing.

“The derivatives market’s risks will be managed by 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 that are listed and traded on a securities exchange and are guaranteed against default by the derivatives exchange’s clearing house.

The market for NGX ETDs will complement existing asset classes, provide investors and other market participants with the tools needed for tactical asset allocation, and improve risk and cost management for effective portfolio management.

It will increase domestic and international investor participation in Nigeria’s financial markets, positively impacting the economy’s performance.