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.
This
announcement follows the successful registration of NG Clearing by SEC, as a
premier Central Counterparty, effective 7 June 2021. 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.
In a
statement endorsed by Olumide Orojimi, Head, Corporate Communications of the
NGX group saying ahead of the launch of derivatives, the Chief Executive
Officer, NGX, Mr. Temi Popoola, CFA, noted that, “The launch of the derivatives
market aligns with our commitment to build 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.”
The
statement further disclosed that leading up to the launch of ETDs in the
market, NGX has continued to ensure widespread understanding of derivatives,
its applicability and how investors can reap maximum value from the asset
class. NGX has collaborated with both local and international organisations
such as SEC, JPMorgan Chase, CBOE Options Institute, and NG Clearing to
facilitate in-depth capacity building programme on the derivatives market. In
addition, through its learning and development arm, X-Academy, NGX has hosted
trainings 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 trainings for other stakeholders in the
near term.
“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. Common underlying
instruments include bonds, commodities, currencies, interest rates, market
indices and stocks. The basic principle behind a derivative contract is to earn
profits by speculating on the value of the underlying asset at a future date.
As such,
derivatives are 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. ETDs are variants of derivatives traded on an organised securities
exchange as against those other derivatives traded through informal
over-the-counter (OTC) market.
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