As investors anticipate the launch of Derivatives trading in the Nigerian capital market, The Nigerian Stock Exchange (NSE or The Exchange) continues to lay the ground work to build a standardized derivatives market. Part of these efforts include capacity building sessions such as the virtual derivatives workshop which held on Tuesday, 08 September 2020.
The training was themed, Adopting Derivatives During Stressed Market Conditions and featured a special presentation from Charlie Rubin, Derivatives Consultant at C-Rubin Futures, and former Senior manager of the New York Stock Exchange, and New York Futures Exchange.
Speaking at the webinar, the Chief Executive Officer, NSE, Mr. Oscar Onyema, stated, “The global financial market has seen good growth and innovation over the past 20 years, and derivatives have contributed substantially to this impressive development. Today, the global derivatives market is the main pillar of the international financial system and the economy as a whole. The Exchange in its quest to be Africa’s preferred Exchange hub, recognizes the importance of a well-developed Derivatives market and has worked assiduously to build the regulatory and technology framework as well as the competence required to support the launch of a standardized Exchange Traded Derivatives (ETDs) market.”
Derivatives Consultant, Charles Rubin highlighted the unique benefits of Derivatives Trading, noting that, “Derivatives have been known to increase trading activity significantly across markets. For instance, the National Stock Exchange of India is witnessing trading activity 25 times more than pre-derivative levels in its 8th year since introducing derivatives. This accounts for four times more than its cash business. Markets are likely to continue to enjoy such activity due to the fact that derivatives provide a hedge against risk, facilitate short selling and allow investors to undertake leveraged buying and selling.”
The Exchange began its journey to launching ETDs in 2014 with a feasibility study which showed that the Nigerian capital market is indeed ready for the more sophisticated investment products ETDs will introduce.
Speaking on the efforts The Exchange has made, the Head, Trading Business, Jude Chiemeka stated, “NSE is committed to building a derivatives market that meets global standards. We have worked with regulators such as the Securities and Exchange Commission and the Central Bank of Nigeria to establish the right regulatory and legal framework for Derivatives in our market. We also continue to build on the trading infrastructure that will ensure domestic and foreign stakeholders are able to trade seamlessly once we launch within subsequent months.”
The Exchange continues to emphasize the importance of capacity building in this regard. It would be recalled that earlier in the year, NSE hosted a training for capital market players in collaboration with the SEC to address the legal and regulatory requirements for the derivatives market. Through its learning and development arm, X-Academy, NSE will host a five-day training from 14 to 18 September to prepare capital market players who wish to undertake the Chartered Institute for Securities & Investment UK Global Derivatives qualification exam. The ultimate goal is to ensure that there is widespread understanding of Derivatives, its applicability and how investors can reap maximum value from the asset class.