Stock exchange to create trade guarantee fund, settlement

The Nigerian Stock Exchange said it would start clearing and settlement of exchange-traded derivative products in the second quarter of 2021, as it seeks to deepen the financial market of Africa’s biggest crude producer.

The NSE obtained approval in principle from the Securities and Exchange Commission to operate NG Clearing Ltd, a central counterparty clearing house. The company will settle trade and counterparty risks for products including “index futures, single stock futures, FX futures, fixed income and commodities futures.”

The market regulator said last year it would register a central clearing house to take on credit risks between parties in derivatives trading and also to help clear and settle deals.

The bourse is introducing futures trading to enable investors to hedge risks and boost investments in the market that is gradually recovering from a slowdown triggered by the coronavirus pandemic and a slump in oil prices.

The 153-member stock exchange is also looking to set up a settlement guarantee fund that it expects to grow rapidly.

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