The second over-the-counter foreign exchange futures contract (NGUS AUG 24 2016) with notional amount of $152.48m at $/N310, matured and was settled on the FMDQ platform.
This development, FMDQ explained in a statement on Thursday, was in line with the OTC Forex Futures Market Framework and the FMDQ OTC Forex Futures Market Operational Standards, trading on the NGUS AUG 24 2016 contract which ceased on August 16, 2016.
It was valued on August 24, 2016 by FMDQ OTC Securities Exchange against the Nigerian Inter-Bank Foreign Exchange Fixing spot rate. Clearing operations and settlement for the final amounts, were effected through the Nigeria Inter-Bank Settlement System Plc, in its capacity as the FMDQ-designated clearing agent for the margining and settlement of the OTC forex futures contracts
The August 24, 2016 matured contract was replaced by the CBN with a new 12-month contract, NGUS AUG 16 2017, with a notional amount on offer of $1bn at $/241. In addition, the CBN refreshed its quotes and published new rates on the existing one-month to 11-month contracts as shown on the FMDQ website
Over $2.40bn worth of the OTC forex futures contracts offered by the CBN, across all the tenors, with the profile of the contract buyers including authorised dealers, foreign portfolio investors and importers, among others, have been traded.
The significant increase in turnover clearly shows the receptiveness of the transaction counterparties and end-users to the product, FMDQ affirmed.
The Naira-settled OTC forex futures product, according to the Exchange, has continued to pave the way for corporates to enhance business planning whilst effectively hedging their forex risk, even as the CBN continues to position and empower stakeholders towards a vibrant forex market
The naira-settled foreign exchange futures market on the FMDQ over-the-counter Securities Exchange would boost liquidity, transparency, price formation and diversification in the foreign exchange market, making the market globally competitive, the Deputy Governor, Economic Policy, Central Bank of Nigeria and Chairman, FMDQ, Dr. Sarah Alade, had said.
With this development, the CBN has become the pioneer seller of the naira-settled OTC forex futures contracts on the FMDQ platform.
At the launch of the scheme, Alade said, “This innovative product will bring liquidity, transparency, price formation and diversification into the forex market, making the market globally competitive. FMDQ, the market organiser and the OTC Forex Futures Exchange, in collaboration with the CBN and other stakeholders, is adequately equipped to deliver the needed transformation in the Nigerian financial market.”