Experts task Capital Market Regulators, Operators on Development

Regulators and operators in the Nigerian capital market have been advised to go slowly in the introduction of derivatives for better results.

Former chairman of the United States Commodities Futures Trading Commission (USCFTC) Mr. James Stone, gave the advice, while speaking at a forum organised by the Nigerian Stock Exchange (NSE) and sponsored by Coronation Merchant Bank Group in Lagos yesterday.

Derivative is a security with a price that is dependent upon or derived from one or more underlying assets. Its value is determined by fluctuations in the underlying asset.

The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes.

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, saying “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, Mr. 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.

“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 CEO pointed out that “last year, we leveraged our X-Academy platform to conduct two tranches of training on the legal and risk aspects of derivatives and central counter-party clearing.”

Also, the managing director of Coronation Merchant Bank, Mr. Abubakar Jimoh said, the initiative 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.