FMDQ OTC PLC. Leading The Nigerian Debt Capital Market Revolution. A Presentation at the 2015 Annual Investor Day Conference

Transcription

1 FMDQ OTC PLC Leading The Nigerian Debt Capital Market Revolution A Presentation at the 2015 Annual Investor Day Conference Tumi Sekoni Head, Business Development May 7, 2015 Global Competitiveness Operational Excellence Liquidity Diversity

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3 Outline Part 1 Evolution of FMDQ OTC PLC 3 Part 2 Nigeria s Foremost Debt Capital Securities Exchange 4 Part 3 Value Proposition 6 Part 4 OTC Market Size 13 Part 5 FMDQ Secondary Market Architecture 14 2

4 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 licensed 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 EGM between July 16-17, 2010 to operate all their current OTC activities under a Securities and Exchange Commission (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 , the 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 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 FMDQ OTC SRO Pre- and post-trade transparency Governance Clearing arrangements 3 FMD empowering the OTC markets

5 FMDQ: Nigeria s Foremost Debt Capital Securities Exchange Incorporated Jan. 6, 2011 Licenced Nov. 6, 2012 to perform the function of OTC securities exchange in the Nigerian capital market Launched Nov. 7, 2013 Background Twin-Oversight Responsibilities OTC Market Organiser Self-Regulatory Organisation (SRO) Central Bank of Nigeria (CBN) Financial Markets Dealers Association (FMDA) The Nigerian Stock Exchange through NSE Consult Limited 24 banks and discount houses Ownership Structure Membership Dealing Members Associate Members: Inter- Dealer Brokers, Brokers and Clients Registration Members: Listings and Quotations FMDQ Business Segments Regulation & Supervision Market & Business Development Market Services & Research Systems & Technology 4

6 FMDQ: Nigeria s Foremost Debt Capital Securities Exchange../2 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 Teamwork & Collaboration Innovation Integrity Value-Adding FMDQ business models are driven by its and Agenda Global Competitiveness Operational Excellence Liquidity Diversity 5

7 Value Proposition Listings & Liquidity Enhancement Product Innovation Market Governance & Development Financial Market Support for Economic Development Price Formation & Transparency 6

8 Value Proposition Listings & Liquidity Enhancement Product Innovation Market Governance & Development Financial Market Support for Economic Development Price Formation & Transparency 7

9 Price Formation & Transparency Providing unprecedented transparency to the Nigerian Fixed Income markets Online market activity information prices, bid and ask quotes, trade sizes, rates, deal times etc. Continuous disclosure of relevant information on quoted instruments issuer information, outstanding value, issuer history etc. Price formation, liquidity enhancement, transparency and efficiency 8

10 FMDQ e-discovery 9

11 FMDQ Website Quotation Issue history of issuer is also provided 10

12 FMDQ Website Quotation../2 11

13 FMDQ Bloomberg E-Bond Quotation 12

14 OTC Market Sizing Improving liquidity in the OTC market. A steady move towards realising of the goal Avg. USD/NGN Rates 2013: $1/N159.21; 2014: $1/N160; 2015: $1/N Other Bonds include Agency, Sub-national, Corporate and Supranational Bonds13 Turnover (US$'million) Jan - Apr* 2015 Foreign Exchange 122, ,030 51,568 Foreign Exchange Derivatives - 40,965 13,807 Treasury Bills 71, ,349 59,208 FGN Bonds 49,360 48,339 14,131 Other Bonds 8,206 1, Eurobonds Repurchase Agreements/Buy-Backs 165, ,885 64,154 Unsecured Placements/Takings 42,014 22,473 Money Market Derivatives , , ,551 No. of Business Days Average Daily Turnover 1,683 2,549 2,892 * Data up to April 24, 2015

15 FMDQ Secondary Market Architecture Trading (Fixed Income, Currencies & Derivatives) FMDQ Dealing Members FMDQ-Bloomberg E-Bond Trading System Thomson Reuters FX Tracker System Settlement Treasury Bills, Bonds & FX CBN RTGS CBN S4 NIBSS CSCS SWIFT/RTGS T.Bills & FGN Bonds Non-FGN Bonds FX Custody Custodians RTGS Real-Time Gross Settlement S4 Scripless Securities Settlement System NIBSS - Nigeria Inter-Bank Settlement System PLC CSCS - Central Securities Clearing System PLC FGN Federal Government of Nigeria 14 FMD empowering the OTC markets

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17 Thank you for your attention Global Competitiveness Operational Excellence Liquidity Diversity

18 APPENDICES 17 FMD empowering the OTC markets

19 Fixed Income Primary Market & FX: Overview Product FGN Bonds Other Bonds Treasury Bills FX Issuer/Supplier FGN State Government, Government Agencies, Corporates & Supranationals FGN Issuing/Sales Agent DMO Issuing Houses DMO N/A Issuance Type Auction (single price) Book Building Auction (multiple price) Oil companies, export proceeds, FPIs; earners, CBN Frequency Monthly As needed Fortnightly As available Participants Primary Dealers Investors Money Market Dealers Authorised Dealers; FX end-users Tenor(s) Maximum Allotment 3, 5, 7, 10 & 20 years 30% of issue size As structured 91, 182 & 364 days At issuer s discretion 30% of issue size Settlement T+2 NA T+1 Supplier s discretion NA NA CBN -Central Bank of Nigeria; DMO -Debt Management Office; FGN - Federal Government of Nigeria; T - Auction date; bn Billion; 18 FMD empowering the OTC markets

20 Debt Capital Market Transformation Focus FMDQ will focus its development of the Nigerian DCM in the following broad areas: Liquidity Enhancement Market Governance Listings & Quotations and Product Development Trading & Settlement Infrastructure Market Transparency FMDQ Capacity Building 19

21 Financial Market Support for Economic Development FMDQ Transparency Global Visibility Secondary Market Liquidity Price Formation Product Innovation & Market Development Competitive Pricing Power Fund Agriculture 20

22 Key Milestones April 2015 Market Transparency & Service Enhancement Nov 2013 Reforms & Regulation Transparency & Sustainability Nigerian Inter-bank Offered Rate (NIBOR) Reform Codification of Market and Trading Rules Execution of Dealing Membership Agreement Introduction of Daily Quotations Licensing of Dealing, Associate List (DQL) and Registration Members Publication of the FGN Bond Introduction of Infractions & Index Activation of Transaction Fees Collection of weekly trade data Penalties Guide Issuance of Market Bulletin Release of CP Quotation Rules Website Launch Approval of Bond Listing and Change in Board Members from Quotation Rules by SEC Inaugural to Substantive Board Formal collaboration with the (represented by shareholders) Central Bank of Nigeria Launch of FMDQ Bloomberg E-Bond Trading System (E-Bond) Activation of Quotations Service on website Deployment of Thomson Reuters FX System Daily Market Activity Report Debut of FMDQ Newsletter Publication of OTC Market Turnover Report Introduction of Dealing Members League Table Release of CP Quotations Process 1 st All Members Meeting on FMDQ Market Architecture Price discovery trajectory: Launch of FMDQ e-discovery E-Bond price global display Commencement of bonds listing 21