P
ProfRem
Guest
The Central Bank of Nigeria (CBN) has made history in the Nigerian foreign exchange market as it becomes the pioneer seller of the Naira-settled OTC foreign exchange Futures contracts on FMDQ OTC Securities Exchange (FMDQ) today, Monday, June 27, 2016.
The Naira-settled OTC FX Futures product, whilst of tremendous benefit to Nigerian corporates, is of immense importance and advantage to the CBN, the Nigerian FX market, and the nation’s economy as a whole.
The OTC FX Futures market will serve the following:
- Minimise the disequilibrium in the Spot FX market and cause the rate to moderate; attract significant capital flows to the Nigerian fixed income and equity markets; and achieve exchange rate stability
- implies that there is no longer the need to front-load FX requirements, which puts immense pressure on, and distorts the Spot FX rate.
- Corporate treasurers are better able to make judgments on when to access the Spot FX market, managing more effectively, their liquidity positions.
- The demand for the US Dollar by end-users can be staggered appropriately, as there will be no requirement for “panic-buying” as end-users are guaranteed a fixed rate for their FX needs when required.
The Naira-settled OTC FX Futures market has today kicked off with the CBN selling OTC FX Futures contracts of non-standardised amounts for different tenors from one month through to 12 months, which will settle on bespoke maturity dates, providing liquidity in the product that will enable corporate treasurers effectively and efficiently manage their FX risks.
With FMDQ, as the OTC FX Futures Exchange, organising the smooth running of this market through its System, the FMDQ OTC FX Futures Trading & Reporting System and its market trading standards and rules, serving to provide the requisite transparency and governance for the success of the market, and the Nigeria Inter-Bank Settlement System PLC (NIBSS), acting as the clearing and settlement infrastructure for the margining and settlement of the OTC FX Futures contracts, ahead of the establishment of a Central Counterparty (CCP), the market has been positioned for a successful operation.
The Naira-settled OTC FX Futures product, whilst of tremendous benefit to Nigerian corporates, is of immense importance and advantage to the CBN, the Nigerian FX market, and the nation’s economy as a whole.
The OTC FX Futures market will serve the following:
- Minimise the disequilibrium in the Spot FX market and cause the rate to moderate; attract significant capital flows to the Nigerian fixed income and equity markets; and achieve exchange rate stability
- implies that there is no longer the need to front-load FX requirements, which puts immense pressure on, and distorts the Spot FX rate.
- Corporate treasurers are better able to make judgments on when to access the Spot FX market, managing more effectively, their liquidity positions.
- The demand for the US Dollar by end-users can be staggered appropriately, as there will be no requirement for “panic-buying” as end-users are guaranteed a fixed rate for their FX needs when required.
The Naira-settled OTC FX Futures market has today kicked off with the CBN selling OTC FX Futures contracts of non-standardised amounts for different tenors from one month through to 12 months, which will settle on bespoke maturity dates, providing liquidity in the product that will enable corporate treasurers effectively and efficiently manage their FX risks.
With FMDQ, as the OTC FX Futures Exchange, organising the smooth running of this market through its System, the FMDQ OTC FX Futures Trading & Reporting System and its market trading standards and rules, serving to provide the requisite transparency and governance for the success of the market, and the Nigeria Inter-Bank Settlement System PLC (NIBSS), acting as the clearing and settlement infrastructure for the margining and settlement of the OTC FX Futures contracts, ahead of the establishment of a Central Counterparty (CCP), the market has been positioned for a successful operation.