Derivatives’ll Trigger Financial Market Growth – NSE

• Derivatives’ll Trigger Financial Market Growth – NSE

The First Vice-President, Nigerian Stock Exchange, Mr. Abimbola Ogunbanjo, has said the development of new and intricate financial instruments, otherwise called derivatives, will trigger exponential growth of the country’s financial market.

He said this at a training organised by the bourse on legal and risk aspects of derivatives and central counterparty clearing transactions, where he was the keynote speaker.

Thus, Exchange Traded Derivatives are expected to be launched by the NSE later this year.

He said the concept of derivatives remained relatively novel in the Nigerian financial market space and had only been noticeable within the over-the-counter segment of the market, adding that, “The frontiers of the Nigerian financial market is expected to grow exponentially due to enhanced liquidity arising from the development of new and intricate financial instruments.

“Given the open and transparent financial market place the NSE offers to a wide range of domestic and international investors, it is expected that all participants must have the commensurate capacity and knowledge-base to deal with the intricacies and the sometimes esoteric features of derivatives. Accordingly, the need for this training in the face of the dearth of local capacity cannot be overemphasised.”

He added, “To some, derivatives are simple tools that allow market participants to efficiently manage their risks. To others, derivatives are weapons that allow market participants to thwart regulations, exceed risk limits, hide market exposures and threaten the very fabric of the world’s economic system.

“As with any tool, the answer as to whether the tool is good or bad is determined by the way it is used and who is using it. No wonder Warren Buffett described derivatives as ‘financial weapons of mass destruction’.

“Product and technology innovation together with competition has fuelled this impressive growth and has created many new jobs both at exchanges and intermediaries as well as at related service providers.”

Given the derivatives market’s global nature, he said users could trade around the clock and make use of derivatives that offer exposure to almost any “underlying” asset class across various global markets.