Global Competitiveness Operational Excellence Liquidity Diversity
FMDQ OTC PLC
Bola Onadele. KokoManaging Director/CEO
September 15, 2015
Nigerian OTC Securities ExchangesA Presentation for Covenant University’s Town & Gown Seminar
Outline
2 FMD…empowering the OTC markets
Outline
Part 1
Financial Markets Nigerian Financial Markets Coverage Role of Financial Markets in the Nigerian Economy Exchange v. Traditional OTC Market Nigerian Securities Exchanges’ Products Coverage
2 - 5
Part 2
FMDQ OTC PLC Evolution Nigeria’s Foremost Debt Capital Securities Exchange Corporate Statements Focus Areas Key Stakeholder Groups Value Proposition
7 - 12
Part 3 Emerging Issues in OTC Securities Exchanges in Nigeria 14
Part 4 FMDQ-Covenant University: Strategic Alliance 16 - 18
Outline
3 FMD…empowering the OTC markets
The Nigerian financial market comprises capital and money market products.
Equity/ Mutual Funds
Corporate Bonds/ABS
Commodity
FGN Bonds
Money &T-Bills
FXState &
Infrastructure Bonds
Real Estate DerivativesMBS
ABS – Asset-Backed SecuritiesMBS – Mortgage-Backed Securities
Money Market
Capital Market
Nigerian Financial Markets Coverage
Outline
4 FMD…empowering the OTC markets
Role of the Financial Markets in the Nigerian Economy
Who The CBN Private Sector Government
Why
Monetary policyFinancial system stability
Transfer of wealth Fiscal policyEconomic development
How
RegulationSupervisionOperations
(Participation & Intervention)
Saving
Lending
Trading
Resource Allocation
Economic Intervention
Financial Markets
Economic Growth Stable & Prosperous Society
Financial markets are both monetary policy implementation vehicles and resource-mobilisation vehicles, essential to economic growth and stability.
Outline
5 FMD…empowering the OTC markets
Exchange v. Traditional OTC Market
Exchange Traditional OTC Market
Rules around trading & information flow Centralised communication of prices to all
market participants Sophisticated trading platforms Multilateral trade arrangement as trades
are done against the exchange Guaranteed clearing and settlement
Segmented into inter-dealer market and customer market Less formalised & organised networks Unstructured price quoting method Less transparent with fewer rules Bilateral trade negotiations and arrangement Transactions are through telephone, e-mail messages and
instant messaging trading systems particularly in the derivative market
Clearing and settlement are between buyer and seller with minimal third party intervention
Absence of a Central Counterparty (CCP) arrangement
Financial markets are either organised as Exchanges or Over-the-Counter (OTC), however the line between these two models is getting blurrier due to recent regulations in the global markets
The reforms in the Nigerian OTC market include:
• Licencing of SROs by the SEC
– FMDQ OTC PLC
– NASD OTC PLCREGULATIONS
Emerging trends in the Global OTC Market CCP arrangements Centralised trade repository systems Centralised trading platform (important for derivatives) Straight-through-processing (STP) mechanism
SRO - Self-Regulatory OrganisationSEC - Securities and Exchange Commission
Outline
6 FMD…empowering the OTC markets
Nigerian Securities Exchanges Products Coverage
OTC Markets Exchanges
Equities, Bonds & Mutual
Funds
NSE
Commodities
NCX
Equities etc.
NASD
FMDQ
FX
Money Market
Products
T-bills
FGN Bonds
Agency, State &
Infrastructure Bonds
CorporateBonds/
ABS/MBSDerivatives
FI Mutual Funds
Products Regulated by:
SEC
DMO
CBN
Market Regulated by SEC
NCX: Nigerian Commodities Exchange; NASD: NASD OTC PLC; NSE: The Nigerian Stock Exchange; FMDQ: FMDQ OTC PLC; SEC: Securities and Exchange Commission; DMO: Debt Management Office; CBN: Central Bank of Nigeria; NA: Not Available; ABS-Asset Backed Securities; MBS-Mortgage Backed SecuritiesFI: Fixed Income
Market Turnover (N‘bn)Jan – Dec 2014 Jan – Aug 2015
NCX NA NANASD 2.3 46.57NSE 1,376.93 705.49FMDQ 103,571.40 93,893.96
Outline
7 FMD…empowering the OTC markets
Outline
Part 1
Financial Markets Nigerian Financial Markets Coverage Role of Financial Markets in the Nigerian Economy Exchange v. Traditional OTC Market Nigerian Securities Exchanges’ Products Coverage
2 - 5
Part 2
FMDQ OTC PLC Evolution Nigeria’s Foremost Debt Capital Securities Exchange Corporate Statements Focus Areas Key Stakeholder Groups Value Proposition
7 - 12
Part 3 Emerging Issues in OTC Securities Exchanges in Nigeria 14
Part 4 FMDQ-Covenant University: Strategic Alliance 16 - 18
Outline
8 FMD…empowering the OTC markets
Evolution of FMDQ OTC PLC
The Financial Markets Dealers Association (FMDA), formerly Money Market Association of Nigeria (MMAN) was established in 1976 and formally registered in 1989 as an association of the treasurers of licenced banks and discount houses in Nigeria
Since 2005, corporate organisations as well as individuals have been granted membership following the adoption of the Association’s new constitution
The 24 banks and 5 discount houses resolved at the FMDA Extra-ordinary General Meeting between July 16-17, 2010 to operate all their current OTC activities under a SEC-registered Self-Regulatory Organisation (SRO) and be governed by this authorised body
The CBN showed its support for the initiative via a sizeable set-up contribution
FMDQ OTC PLC was incorporated on January 6, 2011
On the November 6, 2012, SEC registered FMDQ OTC PLC to perform the function of Over-The-Counter (OTC) market in the Nigerian capital market which makes FMDQ a securities exchange and SRO
FMDQ OTC
Pre- and post-trade transparency
Governance Clearing arrangements
SRO
MMAN 1976>
FX, Money Market
FMDA 2006>
FX, Money Market and FGN Bonds
FMDA 2010>
FX, Money Market, FGN
Bonds, Corporate & Sub-National
Bonds, Commodities
and Derivatives
Outline
9 FMD…empowering the OTC markets
Nigeria’s Foremost Debt Capital Securities Exchange
Dealing Members Associate Members: Inter-
Dealer Brokers, Brokers and Clients
Registration Members: Listings and Quotations
Affiliate Members
Central Bank of Nigeria (CBN) Financial Markets Dealers
Association (FMDA) The Nigerian Stock Exchange
through NSE Consult Limited 24 banks and discount houses
OTC Market Organiser Self-Regulatory Organisation
(SRO)
Incorporated Jan. 6, 2011 Registered Nov. 6, 2012 to
perform the function of OTC securities exchange in the Nigerian capital market
Launched Nov. 7, 2013
Background Twin-Oversight Responsibilities
MembershipOwnership Structure
FMDQ Business Segments
†Regulation & Supervision †Market & Business Development †Market Services & Research †Systems & Technology
Outline
10 FMD…empowering the OTC markets
Corporate Statements
FMDQ business models are product innovation and
operational excellence driven by its “GOLD” Agenda
To be No. 1 in Africa in the Fixed Income and Currency markets by 2019
To empower the financial markets to be innovative and credible, in support of the Nigerian economy
Our Vision
Global Competitiveness Operational Excellence Liquidity Diversity
Our Mission
Teamwork and Collaboration
Innovation
Integrity
Value-Adding
Our Core Values
Outline
11 FMD…empowering the OTC markets
Market Governance & Compliance: focus on maintaining market confidence, credibility & integrity through documentation, surveillance and enforcement of market rules
Market Development: focus on ensuring market efficiency and liquidity by driving product innovation and institutionalising robust market architecture such as trade execution, trade data repository, straight-through-processing and risk management - market intervention standards etc.
Data & Analytics: provide access to market data and information thereby positioning FMDQ as a market information repository, servicing the needs of the regulators, operators, investors and numerous other local and international end users
FMDQ as the foremost debt capital securities exchange carries out the following functions:
Focus Areas
Outline
12 FMD…empowering the OTC markets
Key Stakeholder Groups
FMDQ
Regulators, Government & Authorities
Shareholders
Intermediaries:
Dealing Members,
Brokers etc.
Issuers
Investors, Media &
Public (e.g. Universities)
Service Providers: Registrars, Custodians, Technology
Partners
Employees
A key success factor for a securities exchange is the support and collaboration of its stakeholders. FMDQ strives to develop and maintain participative, collaborative and informative engagement with the diverse stakeholders.
FMDQ and its various stakeholder groups have a synergetic relationship. By working to create and contribute to an environment in which these stakeholders are able to flourish, FMDQ supports its own long-term ability to create value - making the Nigerian financial market globally competitive, operationally excellent, liquid and diverse.
Outline
13 FMD…empowering the OTC markets
Value Proposition: The Game Changer
Market Governance
& Development
Listings & Liquidity
Enhancement
Price Formation &
Transparency
Financial Market
Support for Economic
Development
Competitive Bond Listing Process
Fixed Income Specialist System
Specialist Dealing Members
Collateral Management Network Effects: Market
Integration
Interest Rate and FX Derivatives
Bond Exchange Traded Funds
Regulation & Supervision Financial Markets Risk
Management Repo and Securities Lending
Frameworks Standards & Benchmarks Straight-through-processing
Standards for fixed income & FX Capacity Building
FMDQ Academy Affiliate Members Development Finance
Institutions (DFIs) Public-Private
Partnerships (PPPs) Government Sponsored
Enterprises (GSEs)
FMDQ Daily Quotations List (DQL)
Market Activity Report Fixings Governance Trading Systems:
E-bond / TRFXT FMDQ e-Discovery/e-
MarketData FMDQ Website Quotations
TRFXT-Thomson Reuters Foreign Exchange Trading System
In line with its mission, FMDQ is committed, as part of its strategy for the transformation of the markets, to drive change and impact knowledge through Transparency, Integration, Regulation and Education
Product Innovation
Outline
14 FMD…empowering the OTC markets
Outline
Part 1
Financial Markets Nigerian Financial Markets Coverage Role of Financial Markets in the Nigerian Economy Exchange v. Traditional OTC Market Nigerian Securities Exchanges’ Products Coverage
2 - 5
Part 2
FMDQ OTC PLC Evolution Nigeria’s Foremost Debt Capital Securities Exchange Corporate Statements Focus Areas Key Stakeholder Groups Value Proposition
7 - 12
Part 3 Emerging Issues in OTC Securities Exchanges in Nigeria 14
Part 4 FMDQ-Covenant University: Strategic Alliance 16 - 18
Outline
15 FMD…empowering the OTC markets
Emerging Issues in OTC Securities Exchanges in Nigeria
Regulation Absence of Rules Multiplicity of regulatory oversight
Stakeholder Education Lack of focused empowerment
programmes
Legacy Issues: Change & Acceptance Inadequate operational clarity Ease of market acceptance
Human Capacity Insufficient skilled personnel
Outline
16 FMD…empowering the OTC markets
Outline
Part 1
Financial Markets Nigerian Financial Markets Coverage Role of Financial Markets in the Nigerian Economy Exchange v. Traditional OTC Market Nigerian Securities Exchanges’ Products Coverage
2 - 5
Part 2
FMDQ OTC PLC Evolution Nigeria’s Foremost Debt Capital Securities Exchange Corporate Statements Focus Areas Key Stakeholder Groups Value Proposition
7 - 12
Part 3 Emerging Issues in OTC Securities Exchanges in Nigeria 14
Part 4 FMDQ-Covenant University: Strategic Alliance 16 - 18
Outline
17 FMD…empowering the OTC markets
The Change & The Opportunities…
‘Financial market’ is now everyone’s passion
Fun in empowerment is the real mission
Oh, why is ‘financial market’ such an addiction?
And fast becoming the national religion?
Life is about risk-reward and motivation
What will you do without a vision?An adaptation from FDHL Financial Markets Poem
Outline
18 FMD…empowering the OTC markets
FMDQ-Covenant University: Strategic Alliance
Financial Market-Driven
Curriculum
Financial Market
Research
Financial Market
Empowerment Programmes
e-Knowledge
Vision:To be No. 1 in Africa in the Fixed Income and Currency markets by 2019
Mission:To empower the financial markets to be innovative and credible, in support of the Nigerian economy
“Focus is the fountain of excellence….The focus of the university is to produce men and women who will change their generations through unparalleled ingenuity, creativity and purposeful living and great capacity to face and manage challenges.” Bishop David Oyedepo (2000)
Mission To create knowledge and restore the
dignity of the black man via a Human Development and Total Man Concept driven curriculum, employing innovative, leading edge, teaching and learning methods, research and professional services that promote integrated, life-applicable, life-transforming education relevant to the context of Science, Technology and Human Capacity Building
Covenant University FMDQ OTC PLC
Collaboration Points
Outline
19 FMD…empowering the OTC markets
Affiliate Membership (AFM)
e-Knowledge Modules
Affiliate membership is ideal for institutions and individuals with a keen interest in the FMDQ markets, and an association with the financial markets. This membership category takes advantage of the Exchange’s commitment to develop the Nigerian financial markets via capacity building through knowledge and information
Affiliate Members are granted access to online information on the Nigerian fixed income and currency markets through FMDQ
“e-Knowledge”
• Daily fixed income and currency markets trading hours activities e-Discovery
• Historical FMDQ market datae-MarketData
• In-depth quantitative analysis and statistics e-Analytics
• Market updates, tips & titbits, news highlights, etc.e-MarketMedia
• FMDQ-generated reports on market* activities and events analyses
e-MarketReports
Financial Market Knowledge Acquisition
Effective Trade Monitoring
Informed Investment Decisions
Efficient Price Discovery
Market* Information Repository
Why become an Affiliate Member?
*Fixed Income and Currency
Global Competitiveness Operational Excellence Liquidity Diversity