Derivatives Trading: Stone advises simple test techniques shareholders

AHEAD of the launch of the Exchange Traded Derivatives in nation’s capital market this year, a former Chairman, United States Commodities Futures Trading Commission (US CFTC), James Stone, has advised a cautious approach to drive the succes of the initiative.

Speaking on the theme: “Pluses and Pitfalls of Derivatives Trading’, at the Nigerian Stock Exchange (NSE), Stone advised a gradual process in the introduction of derivatives trading in order to achieve the desired result, noting that start with simple form of derivatives and improve on them.

At the forum, organised by the NSE and sponsored by Coronation Merchant Bank Group, the Ex Chairman of  US CFTC, while charging the a regulators in the country to come up with rules and policies that would make the market very efficient, noted that high level of credibility was needed to ensure efficiency in the new derivatives market.

While emphasizing the need for regulations, Stone noted that derivatives did not cause the 2008 global financial crisis, but said they contributed to exacerbating the situation as a result of synthetic derivatives; corruption; interconnectedness of financial institutions; flawed models that didn’t flag certain risks opaqueness of the market and sometimes lack of understanding with credit rating agencies.

Speaking earlier, the NSE Chief Executive Officer, Oscar Onyema, said the Nigerian Bourse had been planning to launch exchange-traded derivatives in the market and that the experience shared by Stone would assist in that direction.

While, reiterating the exchange’s commitment to building capacity and enhancing the expertise of operators and other associated parties toward collective efficiency, Onyema noted that the lecture provides enriching perspectives as well as strengthen the capacity of capital market operators, who create value for investors through their operations on the floor of the NSE.

Speaking on the initiative, the Managing Director, Coronation Merchant Bank, Abubakar Jimoh, said the bank was excited about the collaboration with the NSE, which, he believed would have positive effects on capital market operations in Nigeria.

He added that Coronation Merchant Bank was not only open to innovative collaborations that would bring development to the African financial landscape, but would serve as a catalyst for revitalising capital market operations across the continent.