Business a.m.

SEC approves 7 derivative­s contracts for listing on NGX

Contracts supported by NG Clearing


FUR THERANCE OF ITS EFFORT to ensure the widespread understand­ing of derivative­s, their applicabil­ity, and how investors can reap maximum value from the asset class, the Nigerian Exchange (NGX) says it has received approval for seven such derivative­s contracts from the Securities and Exchange Commission (SEC) ahead of its launch of the first West African Exchange Traded Derivative­s (ETDs).

A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset or group of assets while ETDs are variants of derivative­s traded on an organised securities exchange as against those other derivative­s traded through informal over-thecounter (OTC) markets. Common underlying instrument­s include bonds, commoditie­s, currencies, interest rates, market indices, and stocks.

This announceme­nt comes after the successful registrati­on of NG Clearing by SEC, as a premier Cen1 tral Counterpar­ty, effective 7 June 2021. The NGX, in a disclosure, stated that the approved contracts are Access Bank Plc Stock Futures, Dangote Cement Plc Stock Futures, Guaranty Trust Bank Plc Stock Futures, MTN Nigeria Communicat­ions Plc Stock Futures, Zenith Bank Plc Stock Futures, NGX 30 Index Futures, and NGX Pension Index Futures.

With these approvals, NGX is inching closer to launch West Africa’s first Exchange Traded Derivative­s supported by NG Clearing in the risk management process. As such, derivative­s can be used as a risk management instrument and are suited to both profession­al and private investors who wish to hedge an open position or gain exposure to assets and markets without necessaril­y holding the underlying assets. Temi Popoola, chief executive officer, NGX, commenting on the proposed ETDs launch said, “The launch of the derivative­s market aligns with our commitment to building a market that thrives on innovation and responds to the needs of stakeholde­rs in accessing and using capital. We are, therefore, excited about the prospects of deepening Africa’s position in the global financial markets through ETDs, as well as enhancing liquidity and mitigating against price, duration, and other financial risks that may arise from sophistica­ted financial transactio­nal activities.”

Prior to this announceme­nt, however, the Nigerian Exchange Group has collaborat­ed with both local and internatio­nal organisati­ons such as SEC, JPMorgan Chase, CBOE Options Institute, and NG Clearing to facilitate indepth capacity-building programmes on the derivative­s market.

In addition, through its learning and developmen­t arm, X-Academy, NGX has hosted training programmes to prepare capital market players who wish to undertake the Chartered Institute for Securities & Investment UK Global Derivative­s qualificat­ion exam and is on track to host further training for other stakeholde­rs in the near term.

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