In a bid to provide investors with a deep and liquid market to hedge their portfolio, the Nigerian Exchange Limited (NGX) says it will introduce more futures contracts in response to market demand and readiness. This is coming after the exchange announced the launch of West Africa’s first Exchange Traded Derivatives (ETDs) market with Equity Index Futures Contracts.
According to the bourse, the new development is consistent with the exchange’s commitment to develop the Nigerian capital market by providing a market that thrives on innovation and responds to the needs of stakeholders in accessing and using capital.
Speaking during a TV interview which was monitored by Daily Sun, the Divisional Head, Capital Markets at the NGX, Jude Chiemeka, while commending the Federal Government, Companies and Allied Matters Act (CAMA) as well as Securities and Exchange Commission (SEC) for aiding the launch, said that Equity Index futures would provide market participants with tools to efficiently hedge or express an opinion on an equity index market.
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Chiemeka also noted that these contracts are attractive to investors because the contracts were standardized and listed on the Exchange trading system(X-GEN) which was deployed by NASDAQ, and there are rules governing order priority. “The contracts are highly geared, the opportunity for leverage in derivatives market is a key element for investors who can use little amount of money or collateral to gain exposure to larger and portion of the underlying instrument and the contracts are cash-settled which means investors do not have to hold physical asset before they can trade the contracts”, he said.