Fixed income market liquidity soars as FMDQ integrates NBFIs

Nigerian fixed income market will soon experience greater liquidity as the FMDQ OTC Securities Exchange receives about 23 non-bank financial institutions (NBFIs) as Dealing Member (Specialists) “DMSs” at the OTC debt capital market, BusinessDay can reveal.

The DMSs market will be one where the participants have the opportunity to act as Market Makers in Treasury Bills and FGN Bonds, providing two-way quotes to other Dealing Member (Specialists) and one-way quotes to clients (institutional and retail), thereby generating the required fixed income market liquidity in these segments of the investor market.

Already, FMDQ Q-Deal has been deployed to facilitate the trading of the fixed income securities by the DMSs – who also are expected to help activate retail participation in Nigeria’s OTC debt capital market.

The unique initiative, where fixed income dealers of NBFIs can trade in Bonds, Commercial Papers (CPs) and Treasury Bills (T.bills) in the FMDQ market, followed the identification of an innovative opportunity by FMDQ for the much needed participation of NBFIs in the Nigerian fixed income market.

The Dealing Member is a subset of the Dealing Member category, which also consists of the Central Bank of Nigeria (CBN) and licensed banks as the primary subset in the FMDQ membership category.

With integrated multi-trading style functionalities, the Q-Deal for Dealing Member features anonymous and bilateral trading capabilities and enhances accessibility, price formation, pre- and post-trade price discovery and market surveillance.

Incorporated into the system is a frontier trade order management solution that will enable DMSs monitor their trading position and profitability on a real-time basis.

In 2015, FMDQ along with over 35 NBFIs finalised the draft framework covering the DMS Project Roll-Out Plan, minimum registration requirements, operational modalities and Trading System requirements for the DMS market and proceeded to implement the various action points, with the activation of the new membership category in December 2015.

BusinessDay learnt that 23 of the institutions that had successfully completed the first phase of the membership application process, and prudently positioning to take advantage of this opportunity are: CLG Securities Limited, Apel Asset Limited, Zedcrest Capital Limited, Cowry Securities Limited, New Prudential Mortgage Bank Limited, Capital Express Securities Limited, Wealthfield Partners Limited, Nissi Lloyds Capital Investments Limited, Alpha Morgan Capital Managers Limited, Planet Capital Limited, Chapel Hill Denham  Securities Limited, and Dunn Loren Merrifield Securities Limited.

Others on the list are: WSTC Financial Services Limited, HIP Asset Management Company Limited, EDC Securities Limited, Cordros Asset Management Limited, Cordros Capital Limited, Union Capital Markets Limited, Cardinal Stone Partners Limited, Independent Securities Limited, Coronation Securities Limited, TrustBanc Capital Management Limited, and Arthur Stevens Asset Management Limited.

“The DMS market will operate like the existing FMDQ Dealing Member (Banks) market with a view to the full integration of the Dealing Member (Banks) and Dealing Member (Specialists) markets at some point in the future. Forward-thinking and resourceful NBFIs, via this new membership category, will contribute to the development of the Nigerian Debt Capital Market (DCM) and indeed leverage on this potentially highly beneficial business opportunity,” Bola Onadele. Koko, managing director, FMDQ OTC plc, said while confirming this development.

Statistics on government securities annual turnover show a remarkable 9,973 percent growth over 9 years from N585.41 billion in 2006 to N58.969 trillion in 2015.

“FMDQ, with the support of the Securities and Exchange Commission (SEC), Nigeria, continues to innovate to ensure its markets maintain high levels of transparency, governance and integrity, advocating investor protection and supporting its long-term ability to continue to create value for all its stakeholders.

“FMDQ OTC Securities Exchange has a vision of becoming number one in Africa in the Fixed Income and Currency Markets by 2019,” Onadele. Koko further told BusinessDay.

Iheanyi Nwachukwu