FMDQ OTC Securities Exchange

Transcription

1 FMDQ OTC Securities Exchange Financial Markets Review Report Volume 2, Number 1 January 2016 Global Competitiveness Operational Excellence Liquidity Diversity

2 Disclaimer This document is produced by FMDQ OTC Securities Exchange (FMDQ) for information purposes only. FMDQ IS NOT an investment advisor, and does not endorse or recommend any securities or other investments. Market data and certain other information in this paper, as well as reference materials and/or links to other sites, have been compiled from publicly available sources believed to be reliable and are for general informational purposes only It does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction to likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration contained therein. All rates and figures appearing are for illustrative purposes only. To the extent that the research data emanates from public sources, the accuracy or completeness of the information contained herein is not guaranteed and is not intended to be relied upon for investment purposes FMDQ, its affiliates, third party information providers, or any of these entities' officers, employees, directors, or agents have not: (1) attested to the merit of the information provided in this paper or on any of these securities; or (2) endorsed or sponsored any of these securities. ADVICE FROM AN INVESTMENT PROFESSIONAL IS STRONGLY ADVISED. The information contained in this paper is provided for informational purposes only All information is provided "as is" without warranty of any kind. FMDQ (its affiliates) and the third party information providers make no representations and disclaim all express, implied, and statutory warranties of any kind to user and/or any third party including warranties as to accuracy, timeliness, completeness, merchantability, or fitness for any particular purpose Unless, in the event of wilful tortious misconduct or gross negligence, FMDQ (and affiliates) and the third party information providers have no liability in tort, contract, or otherwise (and as permitted by law, product liability), to user and/or any third party. FMDQ (and affiliates) and the third party information providers shall under no circumstance be liable to user, and/or any third party for any lost profits or lost opportunity, indirect, special, consequential, incidental, or punitive damages whatsoever, even if FMDQ has been advised of the possibility of such damages 1

3 Glossary Term AFO BN BPS CBN D DTM FMDQ DQL FCY FGN FRA FSI FX HHI M MDAs Mins mm NIBOR NIFEX NITTY OB2WQ OBB OMO Bills O/N OTC PaO Repo RFQ Definition Anonymous Firm Order Billion Basis Point Central Bank of Nigeria Day Days-to-Maturity FMDQ Daily Quotations List Foreign Currency Federal Government of Nigeria Forward Rate Agreement Financial Stress Indicator Foreign Exchange Herfindahl-Hirschman Index Month Ministries, Departments and Agencies of the Federal Government Minutes Million Nigerian Inter-bank Offered Rate Nigerian Inter-bank Foreign Exchange Fixings Nigerian Inter-bank Treasury Bills True Yields Order Based Two (2) Way Quote Open-Buy-Back Open Market Operations Bills Overnight Over-the-Counter Policy Rate against Overnight Rate Repurchase Agreement Request for Quote Term SaO SPV TaN T.Bills trn TTM Y YoY YTD Acceptance Rate Definition Standing Lending Facility against Overnight Rate Special Purpose Vehicle Treasury Bills against NIBOR Treasury Bills Trillion Term-to-Maturity Year Exchange Rate Convergence Long-Term On-The Run Other Bonds Short-Term Trade Intensity Year-on-Year Year-to-Date Notes Ratio of accepted trade orders to total trade orders Spread between the CBN official rate and NIFEX Over one (1) year Most recently issued FGN benchmark security Agency, Sub-national, Corporate, Supranational bonds and Eurobonds One (1) year or less *All data as at January 1, 2016 Ratio of turnover to outstanding value for a period 2

4 Content Part 1 Executive Summary 4 Part 2 OTC Markets Analysis 6 Part 3 Market Surveillance 20 Part 4 League Table 22 Part 5 Appendix 26 3

5 Part 1 Executive Summary 4

6 Executive Summary Despite the economic and political uncertainties in the year 2015, the OTC market witnessed a significant shift in activities when compared to 2014 market activities. Total turnover recorded in 2015 stood at N137.43trn compared to N103.70trn recorded in The FX market which contributed c. 38% of total OTC market turnover in 2014 dropped in contribution to c. 25% in 2015 due to the massive drop in Member-Member trades and change in trading style to Order-Based 2-Way Quoting system. Total market turnover grew by 33% ( 33.85trn) Year-on-Year with the T.bills market accounting for 35% of total turnover and Unsecured Placements/Takings accounting for 5% Other developments in the OTC market are as follows: Trading activities in the bond market increased significantly in the year with a jump in turnover from 7.73trn in 2014 to 10.73trn in i.e. 39% growth in turnover Repos/Buy-Backs recorded a 33% growth in transactions showing growth and significance of secured borrowing/lending in creating stability in the financial system. Total turnover for Repos/Buy-Backs stood at 31.56trn for the year 2015 As at Dec. 2015, the top five (5) Dealing Members in the OTC markets in terms of market share of transaction volumes were Stanbic IBTC Bank PLC (8.79%), Access Bank PLC (8.59%), United Bank for Africa PLC (8.22%),Diamond Bank PLC (8.14%) and First Bank of Nig. Ltd. (8.10%) 5

7 Part 2 OTC Markets Analysis 6

8 OTC Market Turnover TURNOVER (N trn) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Turnover in the OTC markets as at Dec. 31, 2015 stood at N137.43trn; 32.51% (N33.73trn) above the value recorded within same period in 2014, with an average daily turnover of N554.07bn Monthly turnover peaked in Oct. (N14.54trn) before declining by 49.05% to settle at N7.43trn in the month of Dec. Member-Member trades continued to dominate activities in the market, accounting for 72.59% of total turnover, whilst Member-Client transactions accounted for 22.75% of total 2015 turnover PERCENTAGE CONTRIBUTION BY TRADE TYPE Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD Member - Member Member - Client Member - CBN

9 OTC Market Turnover../2 Foreign Exchange PERCENTAGE CONTRIBUTION BY PRODUCT Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD T.Bills FGN Bonds Other Bonds Repos/Buy- Backs Unsecured Placements / Takings At 35.10%, transactions in the T.bills market dominated all other products traded on the FMDQ platform in 2015, with the highest contribution recorded in the month of Oct. For the year 2015, FX market activity and Repos/Buy-backs recorded significant turnover volumes, contributing 25.21% and 22.97% respectively YoY turnover increased for all product categories except Other Bonds that recorded a YoY decrease of 25.45%

10 FX Market Analysis YoY Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD (%) Ave. Interbank $/N No. of NA Business Days 2015 turnover in the FX market stood at $176.56bn; a decrease of $66.77bn (27.44%) over the value recorded in 2014 Average daily turnover in the FX market peaked in Feb., before declining by 45.13% to settle at $0.62bn in Dec. Average daily turnover for the year settled at $0.71bn, 27.35% lower than the value recorded in 2014 Transaction volumes in the FX spot market decreased by 38.42% ($75.45bn) YoY. FX Swaps turnover increased marginally by 1.18% ($0.37bn), while other transactions increased significantly by 52.87% ($8.31bn) on a YoY basis Following the switch to OB2WQ in Feb., the average interbank rate remained relatively stable with an average rate of N for the year Turnover ($'bn) FX Spot (38.42) FX Swaps Others Total (27.44) Daily Average (27.35) Notes: 1 - Average 2 Includes FX Options, FX Forwards and Other FX Derivatives 9

11 FX Market Analysis../2 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% FX TURNOVER BY TRADE TYPE Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Member - Member Member - Client Member - CBN Member-Client transactions continued to dominate activities in the FX market, accounting for 67.08% of total FX turnover YTD with Member-Member and Member- CBN trades accounting for almost equal share at 15.44% and 17.48% contribution respectively Total number of transactions recorded in the FX market YTD clocked 330,976 trades; translating to circa 1,350 trades per day 10

12 Treasury Bills Primary Market Spread 1 (%) Auction Date N/A N/A N/A N/A Average Average Bid-to-Cover Ratio Tenor Average On aggregate, the 364-day bill experienced the most aggressive demand in the year 2015 compared to the 182-day and 91-day T.bills In 2015, yields in the secondary market for 91-day T.bills were, on average, higher by 1.28% compared to yields in the primary market Conversely, 182-day and 364-days T.bills recorded 0.59% and 1.71% lower yields respectively Note 1: Secondary market yield less primary market yield

13 Treasury Bills Market Analysis T.BILLS MONTHLY OUTSTANDING VALUES (N trn) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD T.bills OMO bills Total Turnover (N trn) Trade Intensity TURNOVER BY MATURITY (%) 1M 1-3M 3-6M 6-12M Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD Monthly turnover and trade intensity in the T.bills market troughed in the month of Dec. recording N1.95trn and 0.29 respectively. YTD trade intensity stood at 8.06 During the year, activity was concentrated around T.bills with maturities of between 3-6M, recording 30.71% of total turnover. Other maturities recorded similar contributions to turnover

14 FGN Bonds Primary Market Bid-to-Cover Ratio Amount Sold (N' bn) Jan 16 Feb 13 Mar 13 Apr 17 May 15 Jun 19 Jul 21 Aug 14 Sep 18 Oct 16 Nov 13 Dec Spread 1 (%) Date Jan 16, Feb 13, Mar 13, n/a Apr 17, May 15, Jun 19, Jul 21, n/a Aug 14, n/a Sep 18, n/a Oct 16, n/a Nov 13, n/a Dec 11, n/a Average At 2.58, 10-year FGN bond recorded the highest average bid-to-cover ratio for the year. 5-year and 10-year FGN bonds recorded 1.96 and 1.99, respectively The data distribution of Spread 1 for the 5-year tenor shows c.70th percentile at zero (0), and c.90th percentile at zero (0) for the 20-year tenor Compared to the average yields at auction, average yields in the secondary market for the 10- year tenor were higher by 32bps while the 20-year tenor was lower by 38bps Note: 1: Difference between Secondary and Primary market yields on auction day n/a: Not Available : Tenor

15 FGN Bonds Market Volumes Average Outstanding Market Size (N trn) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Trade Intensity FGN BOND MARKET Month Turnover Trade (N bn) Intensity Jan Feb Mar Apr 1, May Jun Jul Aug Sep Oct 1, Nov 1, Dec YTD 10, Implied Yield Curve (%) 1M 3 6 1Y While trade intensity fluctuated - settling at 2.10, the FGN bonds market size trended upwards over the course of the year recording an increase of 45.37% Year-to-date turnover for FGN bonds, settled at N10.73trn; a 73.62% (N4.55trn) YoY increase On the average, the yield curve declined by 5.94% across all tenors for the year 5-Jan Dec-15 14

16 FGN Bonds Market Activities Daily Averages TIME DISTRIBUTION OF FILLED ORDERS DURATION (Mins) ,440 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average ACCEPTED TRADES (%) RFQs AFOs Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec During the year, activities in the FGN Bond market was similar to that of the T.bills market, in terms of Firm Order fill rates; with 46.59% of orders filled within ten (10) minutes Conversely, the FGN bond market witnessed on the average, 85.54% and 20.03% acceptance rates for RFQs and AFOs, respectively 15

17 Other Bonds Market DOMESTIC BONDS OUTSTANDING VALUE (N'bn) N'bn Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Agency Sub-national Corporate * Supranational Total , , Eurobonds ($'mm) FGN 1, , , , , , , , , , , , Corporate 4, , , , , , , , , , , , Total 6, , , , , , , , , , , , Turnover (N'bn) Domestic Bonds Eurobonds Total In Dec., Agency bonds and Sub-national bonds were amortised by N0.30bn and N22.22bn respectively Total outstanding value of domestic bonds increased by 6.19% between Jan. and Dec., peaking in the month of Oct. Outstanding value of Eurobonds remained flat during the entire year *The increase in Corporate bonds is as a result of the re-classification of the Local Contractor Receivables Management (LCRM) and Nigerian Mortgage Refinance Company (NMRC) bonds as Corporate bonds 16

18 Money Market TURNOVER (N trn) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD Repos / Buy-Backs Unsecured Placements / Takings Total % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% MONEY MARKET TURNOVER Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Repos / Buy-Backs Unsecured Placements / Takings Activities in the money market YTD, was dominated by secured transactions, which accounted for 72.33% of total money market transactions Unsecured Placements/Takings recorded its lowest absolute amount contribution to total OTC turnover in the Month of Dec (N351.73bn) On a YoY basis, Repos/Buy-Backs traded volumes increased by 64.31%, whilst Unsecured Placements/Takings volumes more than doubled at % in

19 Money Market../2 UNSECURED MARKET TURNOVER (N'bn) Bankers' Acceptances Money Market - FCY Local Currency Placements / Takings Money Market Derivatives Local currency Placements/Takings dominated transactions in the Unsecured markets, accounting for 92.01% of turnover in 2015 In the Secured market, turnover of transactions with bonds peaked in the month of Nov. while transactions with T.bills peaked in Apr. T.bills transactions dominated the secured market accounting for 92.77% of market turnover during the year Total Jan Feb Mar , , Apr , , May , , Jun Jul , , Aug Sep Oct , , Nov Dec Total , , SECURED MARKET TURNOVER (N'bn) By Bonds By T.bills Jan , Feb , Mar , Apr , May , Jun , Jul , Aug , Sep , Oct , Nov , Dec , Total 2, ,

20 Money Market../3 SaO (%) TaN (%) PaN (%) All money market indicators SaO, TaN and PaN, displayed high volatility during the year Between Oct. and Dec., TaN troughed at 11.8% due to the change in the interest policy of the CBN. Implying a divergence between the risk-free rate and interbank lending rate Reduction in the policy rate to 11% reversed the downward trend exhibited in PaN 19

21 Part 3 Market Surveillance 20

22 Market Surveillance Summary SUMMARY OF E-BOND TRADING INFRACTIONS FOR 2015 Dealing Member Compliance Total A B C Ranking Infractions Stanbic IBTC Bank PLC 1 Access Bank PLC Zenith Bank PLC FBN Merchant Bank Limited First Bank of Nigeria Limited Citibank Nigeria Limited FSDH Merchant Bank Limited Skye Bank PLC Diamond Bank PLC United Bank for Africa PLC Keystone Bank Limited Ecobank Nigeria Limited Fidelity Bank PLC Sterling Bank PLC Heritage Banking Company Limited Rand Merchant Bank Nigeria Limited Guaranty Trust Bank PLC Standard Chartered Bank Nigeria Limited Union Bank of Nigeria PLC Coronation Merchant Bank Limited Wema Bank PLC First City Monument Bank Limited Unity Bank PLC A Responding to less than 35% of mandatory RFQs B Delay in submitting weekly trade reports C Failure to provide firm quotes for all benchmark securities by 10.00AM - Nil 21

23 Part 4 League Table 22

24 OTC Activity Ranking Rank Institution OTC Share 1 Stanbic IBTC Bank PLC Access Bank PLC United Bank for Africa PLC Diamond Bank PLC First Bank of Nigeria Limited Skye Bank PLC Ecobank Nigeria Limited Union Bank of Nigeria PLC Citibank Nigeria Limited Standard Chartered Bank Nigeria Limited Guaranty Trust Bank PLC Zenith Bank PLC First City Monument Bank Limited Fidelity Bank PLC Sterling Bank PLC Mainstreet Bank Limited FBN Merchant Bank Limited (FMR. Kakawa) FSDH Merchant Bank Limited Wema Bank PLC Heritage Banking Company Limited Coronation Merchant Bank (FMR. ADH) Keystone Bank Limited Enterprise Bank Limited Rand Merchant Bank Nigeria Limited Unity Bank PLC % In 2015, the top five (5) players in the OTC market accounted for an aggregate value of 41.85% of total activities in the market No single player in the market accounted for more than 9% of the total market activity, as such, concentration risk was minimal The bottom five (5) players on the other hand, contributed a joint value of 5% 23

25 OTC Market Share YTD (%) Institution FX T.Bills FGN Bonds Other Bonds Repos / Buy- Backs Unsecured Placements / Takings Access Bank PLC Citibank Nigeria Limited Coronation Merchant Bank (FMR. ADH) Diamond Bank PLC Ecobank Nigeria Limited Enterprise Bank Limited FBN Merchant Bank Limited (FMR. Kakawa) Fidelity Bank PLC First Bank of Nigeria Limited First City Monument Bank Limited FSDH Merchant Bank Limited Guaranty Trust Bank PLC Heritage Banking Company Limited Keystone Bank Limited Mainstreet Bank Limited Rand Merchant Bank Nigeria Limited Skye Bank PLC Stanbic IBTC Bank PLC Standard Chartered Bank Nigeria Limited Sterling Bank PLC Union Bank of Nigeria PLC United Bank for Africa PLC Unity Bank PLC Wema Bank PLC Zenith Bank PLC Note: Top 3 Institutions highlighted 24

26 2015 OTC Market Concentration YTD - HHI 4, , , , , , , Foreign Exchange T.Bills FGN Bonds Other Bonds Unsecured Placements / Takings Repos / Buy- Backs During the year 2015, activities in the Other bonds market remained concentrated amongst few players. This was due to the limited outstanding volume of bonds available for trading and limited price transparency The T.bills and FGN Bond markets were the most diversified FX T.Bills FGN Bonds Other Bonds Repos / Buy- Backs Unsecured Placements / Takings 1, , , HHI: Herfindahl Hirschman Index 25

27 Part 5 Appendix 26

28 Treasury Bills Primary Market 91 Days Bid-to-Cover Ratio 10 Amount Sold (N bn) Jan 08 Jan 22 Feb 05 Feb 19 Mar 05 Mar 19 Mar 26 Apr 09 Apr 23 May 07 May 21 Jun 04 Jun 18 Jun 25 Jul 09 Jul 23 Aug 06 Aug 20 Sep 03 Sep 17 Sep 24 Oct 08 Oct 22 Nov 05 Nov 19 Dec 03 Dec 17 Dec

29 Treasury Bills Primary Market 182 Days Bid-to-Cover Ratio 8.00 Amount Sold (N bn) Jan 08 Jan 22 Feb 05 Feb 19 Mar 05 Mar 19 Mar 26 Apr 09 Apr 23 May 07 May 21 Jun 04 Jun 18 Jun 25 Jul 09 Jul 23 Aug 06 Aug 20 Sep 03 Sep 17 Sep 24 Oct 08 Oct 22 Nov 05 Nov 19 Dec 03 Dec 17 Dec

30 Treasury Bills Primary Market 364 Days Bid-to-Cover Ratio 7.00 Amount Sold (N bn) Jan 08 Jan 22 Feb 05 Feb 19 Mar 05 Mar 19 Mar 26 Apr 09 Apr 23 May 07 May 21 Jun 04 Jun 18 Jun 25 Jul 23 Aug 06 Sep 03 Sep 24 Oct 08 Oct 22 Nov 05 Nov 19 Dec 03 Dec

31 Interest Rate Indicators FSI (%) x6 vs 3M As 3M yields troughed in Nov., spreads between the 3M yield and 10Y bond yield peaked at as Q4 recorded the highest quarterly average in 2015 Spread between 3M Spot rate and 3x6 FRA recorded a trough of in Feb. and reached a peak of 9.79 at the beginning of Sept. 30

32 Money Market SaN (%) PaO (%)

33 OTC Markets Summary OTC TURNOVER (N'trn) Change Daily Average Month No. of Business Days FX T.Bills FGN Bonds Other Bonds Repo / Buy- Backs Unsecured Placements / Takings 2015 YtD Same Period YoY (%) YoY (N'trn) N 'trn $/N $'bn Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YoY (%)

34 Number of Transactions in the OTC Markets Month FX T.Bills FGN Bonds Other Bonds Repos/Buy- Backs Unsecured Placements/ Takings Jan 44,458 9,403 4, , Feb 33,663 11,978 3, , Mar 22,949 11,447 4, , Apr 21,471 13,438 5, , May 31,302 22,353 7, , Jun 24,205 15,163 4, Jul 29,166 22,149 6, , Aug 27,073 19,828 5, , Sep 25,042 17,454 5, , Oct 31,184 24,923 11, , Nov 21,890 16,264 7, , Dec 18,573 5,510 2, Total 330, ,910 67, ,285 7,377 Note: Compared to other products, the total number of transactions in the FX market largely reflects the frequency of Member-Client and Member-CBN trades 33

35 Contact Details Jumoke Olaniyan Divisional Head, Market Development & Regulation e: t: t: , Adebola Lawal Head, Market Development e: adebola.lawal@fmdqotc.com t: t: , FMDQ OTC PLC 1 Olosa Street, Victoria Island, Lagos w: e: info@fmdqotc.com t: ,

36 Global Competitiveness Operational Excellence Liquidity Diversity