NG Clearing steers clearing and settlement of first ETD in Nigeria

LAST Thursday, the first-ever exchange-traded-derivatives (ETD) transactions in West Africa were executed on the trading platform of the Nigerian Exchange Limited, with NG Clearing Limited serving as the Central Counterparty to clear, settle and guarantee the trades.

The first set of transactions were traded by APT Securities and Funds Limited and CardinalStone Securities Limited and Meristem Stockbrokers Limited, in their capacity as pioneer Trading Members with Access Bank and Zenith Bank as the pioneer Clearing Members, respectively.

The contracts traded are the NGX30 Futures for June 2022, NGX Pension for September 2022. Other listed contracts available for trading are NGX30 Futures for September 2022, and NGX Pension for June 2022.

The commencement of exchange-traded derivatives in the Nigerian capital market comes after many years of anticipation by stakeholders and is a remarkable step towards the actualization of the Nigerian Capital Market Masterplan. This also comes at a time when economies are trying to grow after the setback of the COVID-19 pandemic. This creates an opportunity for market liquidity and capital flows, potentially contributing to Nigeria’s post-covid recovery. Derivatives usher in a new asset class that will offer local and foreign investors new opportunities to hedge against market risks in Nigeria.

Speaking about the commencement of the derivatives market, Mr Tapas Das, MD and CEO of NG Clearing Limited, stated that the commencement of the exchange-traded-derivatives in Nigeria was a testament to the maturity of the market, a sign that the market has come of age and has transitioned to a new era.

Regarding the role of NG Clearing, he noted that “NG Clearing’s purpose is to ensure that Nigeria’s derivatives market is safe and stable. We have put in place the infrastructure to achieve this. NG Clearing as a CCP is designed to provide clearing services across multiple asset classes and trading venues. The initial trading venue NG Clearing will be serving is the Nigerian Exchange.”

Mr Das also mentioned that “While we have started with equity index futures, we will subsequently introduce single stock futures, stock options as well as other asset classes, including commodities.”

Commenting on the launch, the Chief Executive Officer (CEO), NGX, Mr Temi Popoola, commended the efforts of stakeholders who have successfully driven the completion of the Derivatives Market since 2014.

“I would like to specially acknowledge the work that was done under the previous management of the Exchange, led by Mr Oscar N. Onyema, OON, whose contributions have formed the foundation of our present gains and accomplishments made manifest through the launch of NGX ETDs market. NGX remains committed to building an exchange that can cater to the increasingly sophisticated needs of domestic and foreign investors. A strong pillar in our strategy is to enhance liquidity and expand market capitalisation to the end that we create value for stakeholders, and the introduction of ETDs is a critical step in the right direction. The platform will play an essential role in broadening and deepening the market, adding new impetus to NGX’s leading position as Africa’s preferred exchange hub.”

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