Credibility of Market is Critical to Effective Derivatives

The Former Chairman of the United States Commodities Futures Trading Commission (US CFTC), James Stone, has stated that a high level of credibility is needed to ensure efficiency in the new derivatives market.

Stone made assertion while speaking at a forum organised by the Nigerian Stock Exchange (NSE) and sponsored by Coronation Merchant Bank Group in Lagos at the weekend.

According to him: “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 to effective derivatives.”

He however, urged regulators and operators in the Nigerian capital market that have been advised to “go the slowly in the introduction in derivatives for better results.”Speaking on “Pluses and Pitfalls of Derivatives Trading,” Stone noted that it is better to begin with the simple form of derivatives and improve on them.

According to him, since there are already exchange-traded funds (ETFs) in Nigeria, it is better to begin with exchange-traded derivatives.

The Chief Executive Officer of NSE, Oscar Onyema disclosed that the exchange has been planning to launch exchange-traded derivatives in the market, saying that the experience shared by Stone will assist in that direction.

He said the having Mr. Stone, a fellow of the American Society of Arts and Sciences, who was appointed by President Jimmy Carter as Chairman of the US CFTC, was an amazing opportunity because of the quality of engagement and insight gained from the interaction.

“The exchange is committed to building capacity and enhancing the expertise of operators and other associated parties towards collective efficiency.  The lecture on ‘Pluses and Pitfalls of Derivatives provided enriching perspectives and strengthen the capacity of capital market operators, who create value for investors through their operations on the floor of the NSE,” Onyema said.

The NSE, who commended Coronation Merchant Bank for sponsoring the forum said this partnership, bodes well with their quest to introduce exchange-traded derivatives into the Nigerian capital market.

“Last year, 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.

In his speech, the Managing Director of Coronation Merchant Bank, Abubakar Jimoh 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.”

According to him, as a wholesale financial institution focused on transforming the face of merchant banking in Africa, Coronation Merchant Bank is not only open to innovative collaborations that will bring development to the African financial landscape, but will 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 – Coronation Money Market Fund, Coronation Fixed Income and Coronation Balanced Fund.

By Helen Oji

The Guardian Newspaper January 22nd, 2018

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