Global Competitiveness Operational Excellence Liquidity Diversity FMDQ OTC PLC Bola Onadele. Koko...

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


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


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.

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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

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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

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Outline

Part 1


2 - 5

Part 2


7 - 12



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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

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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

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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


Our Mission

Teamwork and Collaboration

Innovation

Integrity

Value-Adding

Our Core Values

Outline


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

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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.

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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

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Outline

Part 1


2 - 5

Part 2


7 - 12



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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

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Outline

Part 1


2 - 5

Part 2


7 - 12



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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

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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

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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 FMDQ OTC PLC Bola Onadele. Koko...

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