Q OTC PLC Nigerian OTC Securities Exchanges A Presentation for Covenant University s Town & Gown Seminar Bola Onadele. Koko Managing Director/CEO September 15, 2015 Global Competitiveness Operational Excellence Liquidity Diversity
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 Q 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 Q-Covenant University: Strategic Alliance 16-18 1
Nigerian Financial Markets Coverage The Nigerian financial market comprises capital and money market products. FX Money & T-Bills FGN Bonds State & Infrastructure Bonds Corporate Bonds/ABS Equity/ Mutual Funds MBS Real Estate Commodity Derivatives Money Market Capital Market ABS Asset-Backed Securities MBS Mortgage-Backed Securities 2
How Why Who Outline Role of the Financial Markets in the Nigerian Economy Financial markets are both monetary policy implementation vehicles and resource-mobilisation vehicles, essential to economic growth and stability. The CBN Private Sector Government Monetary policy Transfer of wealth Fiscal policy Financial system stability Financial Markets Economic development Regulation Supervision Operations (Participation & Intervention) Saving Lending Trading Resource Allocation Economic Intervention Economic Growth Stable & Prosperous Society 3
Exchange v. Traditional OTC Market 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 Exchange 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 Traditional OTC Market 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 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 Organisation SEC - Securities and Exchange Commission REGULATIONS The reforms in the Nigerian OTC market include: Licencing of SROs by the SEC Q OTC PLC NASD OTC PLC 4
Nigerian Securities Exchanges Products Coverage Exchanges OTC Markets NCX NSE NASD FI Mutual Funds Q Money Market Products Commodities Equities, Bonds & Mutual Funds Equities etc. FGN Bonds Corporate Bonds/ ABS/MBS Agency, State & Infrastructure Bonds Derivatives FX T-bills Market Turnover (N bn) Jan Dec 2014 Jan Aug 2015 NCX NA NA NASD 2.3 46.57 NSE 1,376.93 705.49 Q 103,571.40 93,893.96 Products Regulated by: SEC DMO CBN Market Regulated by SEC NCX: Nigerian Commodities Exchange; NASD: NASD OTC PLC; NSE: The Nigerian Stock Exchange; Q: Q 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 Securities FI: Fixed Income 5
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 Q 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 Q-Covenant University: Strategic Alliance 16-18 6
Evolution of Q OTC PLC The Financial Markets Dealers Association (A), 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 A 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 Q OTC PLC was incorporated on January 6, 2011 On the November 6, 2012, SEC registered Q OTC PLC to perform the function of Over-The-Counter (OTC) market in the Nigerian capital market which makes Q a securities exchange and SRO MMAN 1976> FX, Money Market A 2006> FX, Money Market and FGN Bonds A 2010> FX, Money Market, FGN Bonds, Corporate & Sub-National Bonds, Commodities and Derivatives Q OTC SRO Pre- and post-trade transparency Governance Clearing arrangements 7
Nigeria s Foremost Debt Capital Securities Exchange 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 OTC Market Organiser Self-Regulatory Organisation (SRO) Central Bank of Nigeria (CBN) Financial Markets Dealers Association (A) 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 Affiliate Members Q Business Segments Regulation & Supervision Market & Business Development Market Services & Research Systems & Technology 8
Corporate Statements 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 and Collaboration Innovation Integrity Value-Adding Q business models are driven by its and Agenda Global Competitiveness Operational Excellence Liquidity Diversity 9
Focus Areas Q as the foremost debt capital securities exchange carries out the following functions: Data & Analytics Market Governance & Compliance Q Market Development 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 Q as a market information repository, servicing the needs of the regulators, operators, investors and numerous other local and international end users 10
Key Stakeholder Groups Employees Regulators, Government & Authorities Shareholders A key success factor for a securities exchange is the support and collaboration of its stakeholders. Q strives to develop and maintain participative, collaborative and informative engagement with the diverse stakeholders. Service Providers: Registrars, Custodians, Technology Partners Investors, Media & Public (e.g. Universities) Q Issuers Intermediaries: Dealing Members, Brokers etc. Q 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, Q supports its own long-term ability to create value - making the Nigerian financial market globally competitive, operationally excellent, liquid and diverse. 11
Value Proposition: The Game Changer In line with its mission, Q 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 Price Formation & Transparency Listings & Liquidity Enhancement Market Governance & Development Financial Market Support for Economic Development Product Innovation TRFXT-Thomson Reuters Foreign Exchange Trading System 12
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 Q 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 Q-Covenant University: Strategic Alliance 16-18 13
Emerging Issues in OTC Securities Exchanges in Nigeria Regulation Absence of Rules Multiplicity of regulatory oversight Legacy Issues: Change & Acceptance Inadequate operational clarity Ease of market acceptance Stakeholder Education Lack of focused empowerment programmes Human Capacity Insufficient skilled personnel 14
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 Q 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 Q-Covenant University: Strategic Alliance 16-18 15
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 16
Q-Covenant University: Strategic Alliance Covenant University 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) Vision: To be No. 1 in Africa in the Fixed Income and Currency markets by 2019 Q OTC PLC Collaboration Points Mission: To empower the financial markets to be innovative and credible, in support of the Nigerian economy 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, lifeapplicable, life-transforming education relevant to the context of Science, Technology and Human Capacity Building Financial Market-Driven Curriculum Financial Market Empowerment Programmes Financial Market Research e-knowledge 17
Affiliate Membership (AFM) Affiliate membership is ideal for institutions and individuals with a keen interest in the Q 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 Q e-knowledge Why become an Affiliate Member? Financial Market Knowledge Acquisition e-discovery e-knowledge Modules Daily fixed income and currency markets trading hours activities Effective Trade Monitoring Informed Investment Decisions Efficient Price Discovery e-marketdata e-analytics e-marketmedia Historical Q market data In-depth quantitative analysis and statistics Market updates, tips & titbits, news highlights, etc. Market* Information Repository *Fixed Income and Currency e-marketreports Q-generated reports on market* activities and events analyses 18
Global Competitiveness Operational Excellence Liquidity Diversity