NSE to introduce Exchange Traded Derivatives for market development

Abimbola Ogunbanjo
Nigeria is to launch Exchange Traded Derivatives (ETD) before the end of 2017 to boost stock market development, an official of the Nigerian Stock Exchange (NSE) said on Monday.

Mr. Abimbola Ogunbanjo, the NSE First Vice President, made this known in a keynote address on Legal and Risk Aspect of Derivatives and Central Counterparty Clearing (CCP) Transactions Training held in Lagos.

He said that the ETD initiative would eventually develop into a robust market that could support `our growth ambitions as a nation’.

According to him, derivatives are simple tools that allow market participants to efficiently manage their risks.

Ogunbanjo said that South Africa’s ETDs – Africa’s first derivative market, grew rapidly in recent years.

He said that the initiative had supported South Africa’s capital inflow and helped market participants to price, unbundle and transfer risks.

“Its market comprises two broad categories, namely: options and futures.

“Within these two categories, a wide range of instruments may be identified: warrants, equity futures and options.

“Other instruments are the agricultural commodity futures and options, interest rate futures and options, currency futures and fixed income derivatives.

“The fixed income derivatives are made up of bond futures, forward rate agreements (FRAs), vanilla swaps, and standard bond options,” the official said.

He said that South Africa had to manage the risks associated with misuse of complex financial products via continuous improvement and enhanced enterprise risk frameworks.

“Accordingly, as innovation drives interest in any product, the market will require continuous advancement to risk frameworks, technology and critical thinking to bring about competition which is a basic driver toward development and growth in the market.”

Ogunbanjo said that the concept of derivatives remained relatively new in the Nigerian financial market space and had only been noticeable within the Over-The-Counter (OTC) segment of the market.

“The frontiers of the Nigerian financial market are expected to grow exponentially due to enhanced liquidity arising from the development of new and intricate financial instruments.

“The NSE offers a wide range of open and transparent financial market place for domestic and international investors,” he said.
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