By Chinwendu Obienyi
FMDQ Securities Exchange Limited has announced that the implementation of its derivatives market development project on its platform was nearing completion.
The Exchange disclosed this to capital market correspondents during its Academy Derivatives Market Webinar series themed; Understanding Exchange Traded Derivatives Market which was held in Lagos recently.
An exchange traded derivative is a financial contract that is listed and trades on a regulated exchange and have become increasingly popular because of the advantages they have over over-the-counter (OTC) derivatives, such as standardization, liquidity, and elimination of default risk.
Speaking during the event, the Vice President, Market Architecture at the FMDQ, Jumoke Olaniyan, said the project started about two and half years ago as the exchange saw the need to introduce derivatives into the capital market.
Olaniyan noted that exchange traded derivatives can be used to hedge exposure or speculate on a wide range of financial assets like commodities, equities, currencies, and even interest rates while adding that the global market is now moving in the direction of derivatives.
She noted that the gross market value of OTC derivatives which provides a measure of amounts at risk, rose from $11.6 trillion to $15.5 trillion during the first half of 2020, led by increases in interest rate derivatives while adding with the introduction of derivatives, the government can leverage derivatives to hedge against crude oil prices.