SEC names de­riv­a­tives trad­ing top pri­or­ity this year

The Punch - - CAPITAL MARKET -

he Se­cu­ri­ties and Ex­change Com­mis­sion has said the de­vel­op­ment of an ef­fi­cient de­riv­a­tives trad­ing mar­ket is one of its top pri­or­i­ties in 2020.

De­riv­a­tives are se­cu­ri­ties that de­rive their value from an un­der­ly­ing se­cu­rity or as­set.

the act­ing Di­rec­tor­gen­eral, SEC, Ms Mary Uduk, while speak­ing dur­ing an in­ter­view, de­scribed de­riv­a­tives as some of the in­vestable prod­ucts ca­pa­ble of boost­ing liq­uid­ity in the cap­i­tal mar­ket.

Ac­cord­ing to her, de­riv­a­tives are traded in all the big mar­kets around the world and are used in risk man­age­ment. they are also used to hedge the trade in other se­cu­ri­ties.

Uduk said she be­lieved this was a good time to have de­riv­a­tives in the cap­i­tal mar­ket.

She said though they were cur­rently be­ing traded in the cap­i­tal mar­kets, it was only over the counter.

She said, “Now, we want to in­tro­duce ex­change traded de­riv­a­tives so that peo­ple can now hedge their po­si­tions in the mar­ket. the num­ber one ad­van­tage apart from the risk man­age­ment one is that it gives traders and in­vestors more in­stru­ments to in­vest in

“the OTC trans­ac­tions are just be­tween one party and the other. So, the two coun­ter­par­ties meet, agree and de­sign con­tracts as it suits them. Most of the time, these are con­tracts done be­tween knowl­edge­able par­ties and they are able to pro­tect them­selves.

“But for the ex­change traded de­riv­a­tives, the com­mis­sion has in place a very ro­bust risk man­age­ment frame­work and that is why it has rolled out these rules.”

Uduk said the rules, in ad­di­tion to the reg­is­tra­tion re­quire­ments, cov­ered the de­riv­a­tives con­tract and the par­tic­i­pants in the de­riv­a­tives mar­ket.

She added that they spec­i­fied the risk man­age­ment frame­work that SEC ex­pected ev­ery par­tic­i­pant in the de­riv­a­tives mar­ket to have.

She said on all counts, the com­mis­sion made a lot of strides in im­ple­ment­ing some of the ini­tia­tives of the 10-year cap­i­tal mar­ket mas­ter plan in 2019.

the SEC boss added that in 2020, the com­mis­sion would con­tinue a few other things such as de­riv­a­tives trad­ing and strengthen the stock­broking seg­ment of the mar­ket.

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