FMDQ OTC PLC
Leading The Nigerian Debt Capital Market Revolution
A Presentation at the 2015 Annual Investor Day Conference
Tumi Sekoni
Head, Business Development
May 7, 2015
Global Competitiveness
Operational Excellence
Liquidity
Diversity
Outline
1
Outline
Outline
Part 1 Evolution of FMDQ OTC PLC
3
Part 2 Nigeria’s Foremost Debt Capital Securities Exchange
4
Part 3 Value Proposition
6
Part 4 OTC Market Size
13
Part 5 FMDQ Secondary Market Architecture
14
2
Outline
Evolution of FMDQ OTC PLC
The Financial Markets Dealers Association (FMDA), formerly Money Market Association of Nigeria
(MMAN) was established in 1976 and formally registered in 1989 as an association of the treasurers of
licensed 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 FMDA EGM between July 16-17, 2010 to operate all
their current OTC activities under a Securities and Exchange Commission (SEC)-registered SelfRegulatory Organisation (SRO) and be governed by this authorised body
The CBN showed its support for the initiative via a sizeable set-up contribution
FMDQ OTC PLC was incorporated on January 6, 2011
On the November 6 2012, the SEC registered FMDQ OTC PLC to perform the function of Over-TheCounter (OTC) market in the Nigerian capital market which makes FMDQ a securities exchange and SRO
MMAN 1976>
FX, Money
Market
FMDA 2006>
FX, Money
Market and
FGN Bonds
FMDA 2010>
FX, Money
Market, FGN
Bonds,
Corporate &
Sub-National
Bonds,
Commodities
and Derivatives
3
FMDQ OTC
SRO
Pre- and post-trade
transparency
Governance
Clearing
arrangements
FMD
…empowering the OTC markets
Outline
FMDQ: Nigeria’s Foremost Debt Capital Securities Exchange
Incorporated Jan. 6, 2011
Licenced Nov. 6, 2012 to perform
the function of OTC securities
exchange in the Nigerian capital
market
Launched Nov. 7, 2013
Background
Ownership
Structure
OTC Market Organiser
Self-Regulatory Organisation
(SRO)
Twin-Oversight
Responsibilities
Membership
Dealing Members
Central Bank of Nigeria (CBN)
Financial Markets Dealers
Association (FMDA)
The Nigerian Stock Exchange
through NSE Consult Limited
24 banks and discount houses
Associate Members: InterDealer Brokers, Brokers and
Clients
Registration Members:
Listings and Quotations
FMDQ Business Segments
†Regulation & Supervision †Market & Business Development
†Market Services & Research †Systems & Technology
4
Outline
FMDQ: Nigeria’s Foremost Debt Capital Securities Exchange../2
To be No. 1 in Africa in the
Fixed Income and Currency
markets by 2019
Teamwork &
Collaboration
Innovation
Integrity
To empower the financial markets to be
innovative and credible, in support of the Nigerian
economy
Value-Adding
FMDQ business models are
and
driven by its
Global Competitiveness
Operational Excellence
Liquidity
5
“
” Agenda
Diversity
Outline
Value Proposition
Listings &
Liquidity
Enhancement
Product
Innovation
Market
Governance
&
Development
6
Financial
Market
Support for
Economic
Development
Price
Formation &
Transparency
Outline
Value Proposition
Listings &
Liquidity
Enhancement
Product
Innovation
Market
Governance
&
Development
7
Financial
Market
Support for
Economic
Development
Price
Formation &
Transparency
Outline
Price Formation & Transparency
Providing unprecedented transparency to the Nigerian Fixed
Income markets
Online market activity information – prices, bid and ask quotes,
trade sizes, rates, deal times etc.
Continuous disclosure of relevant information on quoted instruments
– issuer information, outstanding value, issuer history etc.
Price formation, liquidity enhancement, transparency and efficiency
8
Outline
FMDQ e-Discovery
9
Outline
FMDQ Website Quotation
Issue history of
issuer is also
provided
10
Outline
FMDQ Website Quotation../2
11
Outline
FMDQ Bloomberg E-Bond Quotation
12
Outline
OTC Market Sizing
Improving liquidity in the OTC market. A steady move towards realising of the goal…
Turnover (US$'million)
Jan - Apr*
2013
2014
2015
Foreign Exchange
Foreign Exchange Derivatives
Treasury Bills
FGN Bonds
Other Bonds
Eurobonds
Repurchase Agreements/Buy-Backs
Unsecured Placements/Takings
Money Market Derivatives
122,788
71,291
49,360
8,206
165,726
417,371
No. of Business Days
Average Daily Turnover
* Data up to April 24, 2015
Avg. USD/NGN Rates – 2013: $1/N159.21; 2014: $1/N160; 2015: $1/N194.76
Other Bonds include Agency, Sub-national, Corporate and Supranational Bonds13
248
1,683
202,030
40,965
164,349
48,339
1,422
147,885
42,014
318
647,321
254
2,549
51,568
13,807
59,208
14,131
42
2
64,154
22,473
167
225,551
78
2,892
Outline
FMDQ Secondary Market Architecture
Trading
(Fixed Income,
Currencies & Derivatives)
• FMDQ Dealing Members
• FMDQ-Bloomberg E-Bond Trading System
• Thomson Reuters FX Tracker System
Settlement
Treasury Bills, Bonds &
FX
• CBN RTGS
• CBN S4
• NIBSS
• CSCS
•SWIFT/RTGS
Custody
RTGS – Real-Time Gross Settlement
S4 – Scripless Securities Settlement System
NIBSS - Nigeria Inter-Bank Settlement System PLC
CSCS - Central Securities Clearing System PLC
FGN – Federal Government of Nigeria
14
T.Bills & FGN Bonds
Non-FGN Bonds
FX
• Custodians
FMD
…empowering the OTC markets
Outline
15
Thank you for your attention
Global Competitiveness
Operational Excellence
Liquidity
Diversity
Outline
APPENDICES
17
FMD
…empowering the OTC markets
Outline
Fixed Income Primary Market & FX: Overview
Product
FGN Bonds
Other Bonds
Treasury Bills
FX
Issuer/Supplier
FGN
State Government,
Government
Agencies, Corporates
& Supranationals
FGN
Oil companies, export
proceeds, FPIs;
earners, CBN
Issuing/Sales Agent
DMO
Issuing Houses
DMO
N/A
Issuance Type
Auction
(single price)
Book Building
Auction
(multiple price)
Frequency
Monthly
As needed
Fortnightly
As available
Participants
Primary
Dealers
Investors
Money Market
Dealers
Authorised Dealers; FX
end-users
Tenor(s)
3, 5, 7, 10 &
20 years
As structured
91, 182 & 364
days
NA
Maximum Allotment
30% of issue
size
At issuer’s discretion
30% of issue
size
NA
Settlement
T+2
NA
T+1
Supplier’s discretion
CBN - Central Bank of Nigeria; DMO - Debt Management Office; FGN - Federal Government of Nigeria; T Auction date; bn – Billion;
18
FMD
…empowering the OTC markets
Outline
Debt Capital Market Transformation Focus
FMDQ will focus its development of the Nigerian DCM in the following broad areas:
Liquidity
Enhancement
Market
Governance
Listings &
Quotations
and Product
Development
Market
Transparency
Trading &
Settlement
Infrastructure
FMDQ
19
Capacity
Building
Outline
Financial Market Support for Economic Development
FMDQ
Transparency
Global Visibility
Secondary Market
Liquidity
Price Formation
Product Innovation &
Market Development
Competitive Pricing
Agriculture
20
“Power Fund”
Outline
Key Milestones
April 2015
Market Transparency & Service Enhancement
Reforms & Regulation
Launch of FMDQ Bloomberg E-Bond
Transparency & Sustainability
Nigerian Inter-bank Offered Rate
(NIBOR) Reform
Codification of Market and
Trading Rules
Introduction of Daily Quotations
List (DQL)
Publication of the FGN Bond
Index
Agreement
Licensing of Dealing, Associate
and Registration Members
Introduction
of
Infractions
Penalties Guide
Release of CP Quotations Process
Issuance of Market Bulletin
Collection of weekly trade data
Release of CP Quotation Rules
Website Launch
Approval of Bond Listing and
Inaugural to Substantive Board
(represented by shareholders)
1st All Members’ Meeting on FMDQ
Market Architecture
Quotation Rules by SEC
Formal
collaboration
Central Bank of Nigeria
21
with
&
Activation of Transaction Fees
Change in Board Members from
Nov 2013
Execution of Dealing Membership
Trading System (E-Bond)
Activation of Quotations Service on
website
Deployment of Thomson Reuters FX
System
Daily Market Activity Report
Debut of FMDQ Newsletter
Publication of OTC Market Turnover
Report
Introduction of Dealing Members’
League Table
the
Price discovery trajectory:
Launch of FMDQ e-Discovery
E-Bond price global display
Commencement of bonds listing