…Introduces Exchange Traded Derivatives, Soon

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The Nigerian Stock Exchange (NSE) has concluded plans to introduce Exchange Traded Derivatives (ETDs) into the capital market.
This, according to the notification signed by the General Counsel/Head of Regulation of NSE, Tinuade Awe, is in line with its strategic objective to increase the number of asset classes traded on NSE platform.
The derivatives market when introduced would take care of the need for risk management and investment products in order to facilitate hedging of investment risks and diversification of asset portfolios.
Awe noted that derivative instrument enable investors to hedge their portfolios against adverse price movement which can result in unexpected losses.
The NSE General Counsel said that ETDs are financial contracts that are critically dependent on a regulatory framework which supports their enforceability which the exchange does not currently have the requisite framework for the creation, listing and trading of the products.
The Head of Regulations, however said that the draft derivatives rules sought to create a regulatory framework for the lacking purposes, which will also regulate the activities of the trading members and other market participants in the Exchange Traded Derivatives market.
“The absence of derivatives products contributes to the following persistent problems, which include, inability of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices.
“Lacklustre in the underlying cash market, particularly, in times of stressed economic and market conditions, lack of confident market participation and volatility in exchange revenues are part of the challenge”, he said.
They also invited the public to make contributions to that effect to enable the house present a workable framework.