FMDQ Exchange Seeks Solution To FX Volatility, Hosts Webinar

The Coronavirus pandemic (COVID-19) impacting governments, communities, and families, just as the global economy, bringing about unprecedented market uncertainties and fluctuations, FMDQ Securities Exchange Limited (FMDQ Exchange), on Monday said the need to manage the resultant volatilities has become very urgent.

Since it requires collaboration, the exchange said it will host a webinar for stakeholders of the Nigerian financial market to discuss the topic: Combating Currency Exchange Volatility through Risk Management Tools.

The webinar, scheduled to hold via Zoom Cloud Meetings on Wednesday, June 17, 2020, from 12:00 noon (West African Time), it said in a statement, will give the panelists opportunities to discuss ways of combating volatilities in markets, credit, foreign exchange (FX), become increasingly imperative for continued survival of businesses.

It is expected to offer an opportunity for market participants, including Nigerian corporates, foreign portfolio investors (FPIs), foreign direct investors (FDIs) and other investors, to improve their knowledge of derivatives products. It will also help to demystify the concept of hedging their FX exposures in the Nigerian financial market, and understand the application of the OTC FX Futures product as a crucial risk management tool in achieving this.

Managing risks and the volatilities presented by the current crisis, the statement added, cannot be over-emphasised, as they are a critical measure for business continuity at such a time as now and beyond, and businesses/individuals with interests across global markets must acknowledge, anticipate, and effectively manage these risks to enhance efficient financial planning and operations.

In 2016, the Central Bank of Nigeria (CBN), in collaboration with FMDQ Holdings PLC (FMDQ Group), introduced the Naira-settled OTC FX Futures product to minimise the disequilibrium in the spot FX market and provide a means for businesses to manage their FX exposures towards achieving exchange rate stability.

In keeping with its commitment to the stability of the foreign exchange market, the apex bank, as the pioneer seller of contracts in the market provides quotes for contracts ranging from 1-month through to 60-month contracts (that is, maturities extending up to five years), bringing the total number of open contracts in the market at any one time to 60.

As of May 2020, it said the market has recorded over 47 contracts maturities (valued at over $33bn), with over $46bn worth of FX Futures so far traded on FMDQ Exchange since its inception.

With no settlement default so far, the attendant clearing and settlement of the product continues to be facilitated by FMDQ’s clearing house subsidiary, FMDQ Clear Limited.

As Africa’s first vertical financial market infrastructure (FMI) group, FMDQ said it is set to launch a derivatives market in the Nigerian financial market as part of its commitment to the continuous introduction of innovative and dependable capital market solutions to tackle the challenges presented to the markets, towards making it resilient and globally competitive.