Expert tasks capital market stakeholders on derivatives trading

The capital market community has been tasked to take a gradual process in the introduction of derivatives trading in order to achieve the desired result.

James Stone, former Chairman, United States Commodities Futures Trading Commission (US CFTC), made the remark at a forum in Lagos on Saturday.

The forum was organised by the Nigerian Stock Exchange (NSE) and sponsored by Coronation Merchant Bank Group.

Stone said that Nigeria should start with simple form of derivatives and improve on them for better result, the News Agency of Nigeria reports.

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A derivative is a contract between two parties which derives its value/price from an underlying asset. The most common types of derivatives are futures, options, forwards and swaps.

Speaking on the theme: “Pluses and Pitfalls of Derivatives Trading’’ he said that it was better to begin with exchange traded derivatives that Nigeria had already.

Stone said that a high level of credibility was needed to ensure efficiency in the new derivatives market.

“A degree of trust that will enable you draw the resources of other nations is needed to drive derivatives market. The kind of credibility a market has is critical for effective derivatives,” Stone said.

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

Onyema reiterated the exchange’s commitment to building capacity and enhancing the expertise of operators and other associated parties toward collective efficiency.

“The lecture on ‘Pluses and Pitfalls of Derivatives’ 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,” Onyema said.

Onyema, however, commended Coronation Merchant Bank for sponsoring the forum.

He said that the partnership bodes well with their quest to introduce exchange-traded derivatives into the Nigerian capital market.

“In 2017, we leveraged our X-Academy platform to conduct two tranches of training on the legal and risk aspects of derivatives and central counterparty clearing,” he said.

Abubakar Jimoh, the Managing Director, Coronation Merchant Bank, said: “we are excited about our collaboration with the NSE on this noteworthy initiative, which will have positive effects on capital market operations in Nigeria.”

Jimoh said that the bank as a wholesale financial institution, major focus was on transforming the face of merchant banking in Africa.

He said 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.

Coronation Merchant Bank Group is a major player on the NSE whose subsidiary Coronation Asset Management recently listed three Mutual Funds on the exchange.

They are the Coronation Money Market Fund, Coronation Fixed Income and Coronation Balanced.

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