September 23, 2019 / 3.30PM / FMDQ / Header Image Credit: FMDQ
In yet another significant milestone for the Nigerian capital market, FMDQ Securities Exchange PLC (FMDQ Exchange or the Exchange), having positioned itself as an innovative and pacesetting financial market infrastructure group, announced the operationalization of its wholly owned central securities depository (CSD), FMDQ Depository Limited (FMDQ Depository or the Depository), on August 5, 2019.
The incorporation of this important market infrastructure, in December 2018, and its registration by the Securities and Exchange Commission, Nigeria (SEC or the Commission) in June 2019, follows the operationalization of FMDQ Clear Limited (FMDQ Clear) - Nigeria's first central clearing house, in January 2018; completing the value chain of pertinent market infrastructure for the pre-trade, trade and post-trade spectrums provided by FMDQ - from listing to trading, clearing, settlement and data, amongst other services.
An effective and fully developed securities depository system is essential for maintaining and enhancing market efficiency, which is one of the core characteristics of a mature capital market, and the depository and attendant custodial service is one of the key ingredients of developed global markets.
Therefore, as a strategically positioned CSD, FMDQ Depository will complement the clearing function discharged by FMDQ Clear by providing the requisite framework for collateral caching, asset servicing and settlement services in the Nigerian financial markets, offering market participants an unrivalled opportunity to experience enhanced straight-through-processing.
Specifically, FMDQ Depository is positioned to significantly reduce principal risks in the nation's financial markets by linking securities and cash in a way that enhances delivery versus payment, thus facilitating seamless settlement finality.
Ahead of operationalizing its business franchise, FMDQ Depository commenced leveraging on strategic partnerships and alliances formed by the FMDQ entities, whilst engaging its critical stakeholders, including regulators and market participants, across the value chain, on its operational readiness to implement value-added product and service offerings.
These engagements with stakeholders have culminated in the progressive support of the Central Bank of Nigeria (CBN), which has taken the lead in upgrading relevant guidelines - starting with the 2009 Guidelines on the Issuance and Treatment of Bankers' Acceptances and Commercial Papers, which was revised ten years after on September 11, 2019 - to ensure that market stakeholders have a choice of Nigerian depositories, thereby further enhancing market efficiency in the markets.
It is envisaged that the SEC, following its registration of the Depository, is also taking steps to upgrade its regulations to reflect the existence of another depository in the capital market landscape. These changes will facilitate the interoperability between the two (2) depositories in the country, thereby optimising freedom of choice and integrity of depository services, making our financial markets globally competitive and operationally excellent.
From its provision of data integrity and governance, innovative technology in operational processes and straight-through-processing via the FMDQ proprietary system, FMDQ Q-ex, FMDQ Depository has provisioned requisite structures to deliver a client-focused depository of choice, with excellent operational capabilities tailored to provide value-adding services to its stakeholders in the Nigerian financial market.
According to the Managing Director/Chief Executive Officer of FMDQ Exchange, Mr. Bola Onadele. Koko, "With an overarching objective of making the Nigerian financial market globally competitive, operationally excellent, liquid and diverse, FMDQ, in collaboration with its Members, regulators and other stakeholders, will continue to work hard to place Nigeria on the global financial market map despite the numerous challenges".
The three (3) SEC-registered FMDQ entities - FMDQ Exchange, FMDQ Clear and FMDQ Depository - make up Africa's first vertically integrated financial market infrastructure group, providing a one-stop platform for the seamless listing, trading, clearing, settlement and recording of financial market transactions across the debt capital, equity capital, foreign exchange and derivatives markets.