Former US CFTC Chair, James Stone, Speaks on the Pluses and Pitfalls of Derivatives Trading


Friday, January 19, 2018 /12:15 PM /NSE 

As part of strategic initiatives to enhance the efficiency of capital market operations in Nigeria, The Nigerian Stock Exchange and Coronation Merchant Bank invited the former Chair of the US Commodities Futures Trading Commission (US CFTC), Mr. James Stone to deliver a special lecture on ‘Pluses and Pitfalls of Derivatives Trading’ at the Nigerian Stock Exchange on Thursday, January 18, 2018. 

The initiative, which is a component of the Exchange’s international stakeholders’ engagement strategy that commenced four years ago, also provided an opportunity for Mr. Stone, a former lecturer in Economics at Harvard University and former Commissioner of Insurance, Massachusetts, to interact with leadership of the Lagos bourse and leading figures in Nigeria’s capital market.

Commenting, Oscar N. Onyema OON, CEO of the Nigerian Stock Exchange said “This partnership bodes well with our quest to introduce exchange traded derivatives into the Nigerian capital market. Last year, we leveraged our X-Academy platform to conduct two tranches of training on the legal and risk aspects of derivatives and central counterparty clearing. Mr. Stone’s visit and lecture will add to the knowledge base that currently exists in preparation for the launch of the product this year”.

He added that “the Exchange is committed to building capacity and enhancing the expertise of operators and investors towards a more efficient market. Therefore, the lecture on ‘Pluses and Pitfalls of Derivatives Trading’ to be delivered by Mr. James Stone will provide enriching perspectives and strengthen the capacity of capital market operators, who create value for investors through their operations on the Nigeria Stock Exchange”.  

Likewise, Coronation Merchant Bank Group, a major player on The Nigerian Stock Exchange whose subsidiary, Coronation Asset Management recently listed three Mutual Funds on the Exchange – Coronation Money Market Fund, Coronation Fixed Income and Coronation Balanced Fund, noted that “a collaborative approach to capacity building will unlock inherent value on the Exchange”. According to its Managing Director, Abubakar Jimoh “we are excited about our collaboration with the NSE on this noteworthy initiative, which will have positive effects on capital market operations in Nigeria”

Jimoh noted that “as a wholesale financial institution focused on transforming the face of merchant banking in Africa, Coronation Merchant Bank is not only open to innovative collaborations that will bring development to the African financial landscape, but will serve as a catalyst for revitalizing capital market operations across the continent”.

In his lecture, Mr. Stone noted that derivatives did not cause the 2008 global financial crisis, however they contributed to exacerbating the situation as a result of synthetic derivatives; corruption; interconnectedness of financial institutions; flawed models that didn’t flag certain risks opaqueness of the market and sometimes lack of understanding with credit rating agencies. He stated that for the derivatives market to be efficient, regulation is key, while everything else will have to be taken slow and learnt through manageable experiments.

To manage apprehension and anxiety about participating in derivatives products, Mr. Stone advised market participants to begin with Exchange Traded Derivatives which offer a reliable platform for price discovery. He added that participants should start small on all trading experiments and arm themselves by working for a sophisticated trader as well as spend time with experts.

The Commodities Futures Trading Commission is an independ
ent agency of the US government created in 1974 that regulates US futures and option markets. . Mr. Stone, the founder and CEO of Boston-based Plymouth Rock Assurance Corporation and Chief Executive of The Plymouth Rock Company – the holding company, served as its chairman till 1983 following his appointment in 1979 by President Jimmy Carter.  

Born in New York City in 1947, Mr. Stone was educated in the public schools of Pelham, New York, and at Harvard University.  In 1969, he received his bachelor's degree, graduating with the Highest Honors in Economics, and was also elected as a member to Phi Beta Kappa.  His academic work was recognized with the Allyn Young Prize for the best undergraduate economics thesis, as well as the Goldsmith Prize for best research paper presented to the Graduate School in Economics.  Stone later received his Ph.D. in Economics from Harvard in 1973 and was appointed as a lecturer in Economics by the Harvard faculty to teach courses on the economics of securities markets.

 Proshare Nigeria Pvt. Ltd.

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