The Securities and Exchange Commission (SEC) has approved 7 (seven) derivative contracts for the Nigerian Exchange Limited.
The was disclosed by the Exchange on Monday. The approved contracts are Access Bank Plc Stock Futures, Dangote Cement Plc Stock Futures, Guaranty Trust Bank Plc Stock Futures, MTN Nigeria Communications Plc Stock Futures, Zenith Bank Plc Stock Futures, NGX 30 Index Futures, and NGX Pension Index Futures, according to the Exchange.
The announcement follows the successful registration of NG Clearing by SEC, as a premier Central Counterparty, effective 7 June 2021. With approval given by SEC, NGX is set to launch West Africa’s first Exchange Traded Derivatives (ETD) supported by NG Clearing in the risk management process.
“The launch of the derivatives market aligns with our commitment to building a market that thrives on innovation and responds to the needs of stakeholders in accessing and using capital,” said the Chief Executive Officer, NGX, Mr. Temi Popoola, CFA.
“We are, therefore, excited about the prospects of deepening Africa’s position in the global financial markets through ETDs, as well as enhancing liquidity and mitigating against price, duration, and other financial risks that may arise from sophisticated financial transactional activities.”
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A derivative is a contract between two or more parties. As the name implies, its value is based on an agreed-upon underlying financial asset or group of assets. Bonds, commodities, currencies, interest rates, market indices, and stocks are among the commonly used assets.
Earning profits by speculating on the value of the underlying asset at a future date is the fundamental behind derivative contracts.
Both professional and private investors use derivative contracts as risk management tools to hedge an open position or gain exposure to assets and markets without necessarily holding the underlying assets.
NGX said it has continued to ensure a widespread understanding of derivatives, its applicability, and how investors can reap maximum value from the asset class.
The Exchange said it has collaborated with both local and international organisations such as SEC, JPMorgan Chase, CBOE Options Institute, and NG Clearing to facilitate in-depth capacity-building programs on the derivatives market.
Ifunanya Ikueze is an Engineer, Safety Professional, Writer, Investor, Entrepreneur and Educator.