FMDQ rising profile boosts capital market confidence

With the long run of bearish trends in the Nigeria Stock Exchange, NSE, which has affected negatively investors’ confidence, Financial Dealers Market Quotations (FMDQ) seems to be offering a breath of fresh air with its rising profile. Recently, it has been churning out innovative products and services that are surprisingly charming many investors and companies.

This has sparked speculation of its intention to challenge the tradition bourse, the NSE. But contrary to the expectation of many market enthusiasts, FMDQ Securities Exchange Plc has explained that it is not out to compete with the Nigerian Stock Exchange (NSE) in equities trading or ask companies to delist but to create new entities for the future.

The managing director, Mr. Bola Onadeji, said at a media parley in Lagos that the new securities exchange would work with Small and Medium Enterprises (SMEs) and private companies to create new entities for the future.

FMDQ had in August last year formally launched its new status and corporate identity as a full-fledged securities exchange with registration to trade in all securities including fixed income, equities, derivatives, commodities and foreign exchange.

Formerly known as FMDQ OTC Securities Exchange, the transition of FMDQ from an over-the-counter (OTC) platform to a full-blown securities exchange, analysts say, represents a paradigm shift in the Nigerian capital market as it ends the unwritten mono-stock exchange policy and opens up the capital market to intense competition.

Nigeria’s apex capital market regulator, the Securities and Exchange Commission (SEC) had approved the amendment of the registration of FMDQ OTC Plc from ‘an OTC Market’ to a full-fledged ‘securities exchange’ in March 2019.

FMDQ then secured necessary approvals for a name change to ‘FMDQ Securities Exchange Plc (FMDQ Exchange) with immediate effect, thereby aligning its name to its upgraded status in the capital market.

Again, in June 2019, the exchange received SEC’s registration of its wholly owned central securities depository subsidiary – FMDQ Depository Limited, which is positioned to provide collateral caching, custodian and settlement services with excellent operational capabilities tailored to provide value to its stakeholders.

Explaining why FMDQ Holdings Plc was licensed as a full-fledged securities exchange, SEC had said it was done in order to create competition in the capital market.

Speaking at a media parley after the 2019 second quarter Capital Market Committee meeting in Lagos, the acting director general of SEC, Mrs. Mary Uduk made known that competition is healthy for business and that licensing FMDQ would create options for market operators to choose from.

She said, “Competition is good for the market. We expect other similar cases to follow. FMDQ’s licence creates the kind of competition that will bring down cost and improve efficiency in the capital market. It is a welcome development to the market, and it shows that the market is growing.”

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Similarly, in what looked like a corroboration of SEC’s position, the chief executive officer of the Nigeria Stock Exchange, Mr. Oscar Onyema, has said the NSE and FMDQ will compete within the ambit of the law. Onyema was responding to questions bothering on possible rivalry between the two exchanges during the 2019 recap and outlook for 2020 which held in Lagos recently.

“Yes, we are going to compete…we are going to compete within the law”, the NSE boss said.

FMDQ Depository Limited completes the value chain of pertinent market infrastructure in the Nigerian financial markets, particularly the post-trade spectrum, following the operationalisation of FMDQ Clear Limited.

According to FMDQ, the implications of its new status are far-reaching as the careful implementation of the FMDQ Entities – FMDQ Exchange, FMDQ Clear and FMDQ Depository – have created robust linkages between hitherto fragmented spheres of the markets. They have also presented the market with an efficient, innovative and integrated financial market infrastructure (FMI) group for the seamless execution, clearing and settlement of financial markets transactions.

Having set the pace in the fixed income, currency and derivatives markets, the exchange is positioning itself to cover new markets equities and commodities in the short to medium term. .

Mr. Onadeji noted that the exchange, which he assured would continue to trade in all securities including fixed income, derivatives, commodities and foreign exchange, was looking at how to create new entities for the future, work with and nurture SMEs and private companies in Nigeria that have no access to long-term financing.

“We are not playing the game of attacking the NSE. That is not our role or our job or the way we do business. Rather we are looking at how to create new entities for the future, to work and nurture them, to work with SMEs, private companies in Nigeria who have not had access to long term financing.

“So, we are in the business of planning 20-30 years ahead and working with Nigerian entities in getting prosperity to Nigerians,” he said.

Last year, the exchange unveiled plans to roll out the first derivative products in the first quarter of the year 2020. According to a report in The Guardian of August 20, 2019, titled: ‘FMDQ targets derivative products in Q1 2020, plans equity trading’, this is in addition to a concluded arrangement to expand product offering, including equities trading.

Onadele had told newsmen in Lagos that the exchange would kick-off with the equities segment of the market as soon as companies begin to demonstrate interest in accessing the capital market through the FMDQ platform.

In furtherance of its product and market development mandate, FMDQ has instituted an education programme for the Nigerian financial market stakeholders such as governments, regulators, operators, investing public, media and students in support of its sustainability strategy and corporate vision.

The FMDQ Academy is positioned to drive the exchange’s sustainability by rallying financial market participants in alignment with FMDQ’s product innovation and market development agenda.

In 2018, the FMDQ OTC Exchange marked its 5th anniversary as an exchange in the fixed income and debt capital market space in Nigeria, in an event that attracted eminent personalities and notable players in the financial market.

It was an opportunity to reflect on the journey of FMDQ formed by the Financial Market Dealers Association in 2013 and licensed by the Securities and Exchange Commission.

His Royal Majesty, Mohammed Sanusi II, former Central Bank of Nigeria (CBN) governor and Emir of Kano, who was the special guest of honour, Dr Sarah Alade, former deputy governor of the CBN and ex-chairman of the FMDQ, and Mr. Aigboje Aig-Imoukhuede, former Group managing director, Access Bank and pioneer chairman, FMDQ, all lauded the FMDQ team for the remarkable strides and impact they it has made so far.

However, Sanusi speaking on his expectations in the next five years stated that his vision for the FMDQ OTC exchange had always been for it to be at the core of activities in the international financial market.

The Emir also made a case for the exchange to look at how it can serve as a platform that can transform savings from current accounts in the financial market to long term bonds and funding that can address infrastructure issues and areas like the education sector.

Dr. Alade, on her part, called on the FMDQ OTC to set out to address financial deepening of the market, expansion of the derivatives market and driving an active Nigerian inter-bank market. Mr. Aig-Imoukhuede identified “demutualization” and addressing the gaps in the debt capital market through the deployment of technology as the way forward for the exchange.

On Saturday, September 29, 2018, the exchange won CAMCAN Nigerian Capital Market Performance award “in special recognition of FMDQ’s contribution towards the development and transformation of the Nigerian debt capital market.”

The award was a tribute to FMDQ for its efforts towards revolutionising the Nigerian debt market and confirms that it lives true to its culture of innovation, through the implementation of forward-thinking initiatives for the development of a well-developed debt capital market in Nigeria.

Ms. Tumi Sekoni, the associate executive director, Capital Markets, while receiving the award for the OTC Exchange, noted that investor education is critical in achieving retail participation in the nation’s capital market.