FMDQ partners Frontclear to conduct feasibility study workshop on central clearing house

 
AS a change agent in the Nigerian financial market space, FMDQ OTC Securities Exchange (FMDQ) strives to support the development of the market through its “GOLD” (Global Competitiveness, Operational Excellence, Liquidity and Diversity) Agenda. In partnership with Frontclear Management B.V. (a global development finance company), FMDQ is developing a comprehensive feasibility and structuring plan for the establishment of an over-the-counter (OTC) Central Clearing House (CCH), and a renowned consulting company, Catalyst Development (UK) Ltd, has been appointed to facilitate the feasibility study.
As part of preparations for the feasibility study, a stakeholder engagement workshop was held in Lagos on March 2, 2017, to chart the journey towards the conceptualisation, development and delivery of a world-class CCH. The agreed approach is to set up a credible OTC CCH, in the short-to-medium term, to start deriving the benefits of central clearing for instruments traded (either as spot or derivatives) on FMDQ, while pursuing the adoption of global standards required for the establishment of a Central Counter Party (CCP) system in the long-term.
Additionally, participants at the workshop agreed that the establishment of a credible OTC CCH will aid FMDQ, as a securities exchange, to not only safeguard the OTC markets and FMDQ’s Dealing Members from losses that may arise from counterparty risk, but also ensure certainty of trade settlement, finality and enforceability; manage defaults among Dealing Members by guaranteeing settlement of trades; ensure orderly markets in periods of stress; increase liquidity of products traded on the OTC Exchange; promote market confidence among participants by retaining market stability and inclusiveness; increase efficiency of capital utilisation especially for Dealing Member (Banks); and ensure real-time assessment and valuation of counterparty exposure through seamless integration of the OTC CCH system with FMDQ’s trading system, amongst others. They further agreed that there is a need to accelerate the journey to deliver this crucial market infrastructure, as the benefits are crucial for the development of the Nigerian OTC markets.
Representatives of the Central Bank of Nigeria applauded this innovative initiative and reassured the participants of their support, whilst requesting for a speedy implementation of the recommendations of the workshop.
Being Africa’s largest economy, the development of the Nigerian financial markets is crucial, with improved market architecture, increased requirement for bespoke derivatives hedging products and regulation as key drivers for this development. FMDQ, in its capacity as a market organiser remains resolute in its commitment to its operational mandate of aligning the markets within its purview to international standards, striving to ensure they emerge as globally competitive, operationally excellent, liquid and diverse. Through the continued support for institutional growth, the OTC Exchange shall invariably contribute its quota to rejuvenating the vibrancy of the Nigerian economy.