By Nkiruka Nnorom
AHEAD of the launch of Exchange Traded Derivatives, ETDs, by the Nigerian Stock Exchange, NSE, later in the year, the second vice-president of the NSE Council, Mr. Abimbola Ogunbanjo, has expressed optimism that the ETD initiative will develop into a robust market that could support the nation’s growth ambition.
He spoke at a training on ‘Legal & Risk Aspects of Derivatives and Central Counter-party Clearing (CCP) Transactions’ organised by the Exchange in Lagos, to mark the take-off of the X-Academy recently launched by the NSE for investors and dealers.
He said his optimism stemmed from the success of the same initiative in South Africa as an example of Africa’s first derivative market, stressing that the product has experienced exponential growth globally, growing by over 24 per cent in the last 10 years with about €457 trillion of notional amount outstanding in 2014.
Ogunbanjo attributed the growth to drive for product and technology innovation coupled with competition, stressing that it has created many new jobs both at exchanges and intermediaries as well as at related service providers.
“No other class of financial instruments has experienced as much innovation from its embryonic development to a fully developed and respected financial market”, he said, adding “European derivatives players, today, account for more than 20 percent of the European wholesale financial services sector’s revenues and contribute 0.4 percent to total European Gross Domestic Product, GDP.
“South Africa’s derivatives market has grown rapidly in recent years, which has supported capital inflows and helped market participants to price, unbundle and transfer risk.”
He dismissed the notion that ETDs could be used to thwart market regulation, arguing, “To some, derivatives are simple tools that allow market participants to efficiently manage their risks. To others, derivatives are weapons that allow market participants to thwart…