By NKIRUKA NNOROM

Frontier markets need to establish robust standards to guide the development of their Over-the-Counter, OTC, spot market, said the Managing Director/CEO, Financial Market Dealers Quotation, Mr. Bola Onadele.

Onadele, who made the remark at a press briefing to announce the planned launch of FMDQ OTC Plc, November, in Lagos said that Nigeria’s desire to embrace plain-vanilla derivatives products and that would not be achieved with weak spot market.

He noted that frontier markets need to urgently address issues bordering on governance, risk management, infrastructure, liquidity and human capital among others to strengthen their OTC market.

“In Nigeria, the timing is great for such reforms as our regulators –the Central Bank of Nigeria and the Securities and Exchange Commission- are supportive of initiatives that would better organise the market,” he said.

He explained that FMDQ is poised to be the most liquid, efficient, secure and technology-driven Over-the-Counter, OTC, market in entire Africa by 2018, saying that it plans to achieve the goal through its GOLD agenda, which stands for global competitiveness, operational excellence, liquidity and diversity.

Outlining its five-year plan, Onadele said that FMDQ will focus on achieving market transparency in the remaining part of this year; In 2014, it will focus on increasing its trading intensity; 2015 will be dedicated to product diversification; In 2016, the exchange, he said, will focus on integration with external financial markets, while in the fifth year -2017/2018- it will engage in strategic unbundling for greater impact.

He said FMDQ aims to provide a market for issuers and investors to interact and ensure transparency and credible price formation in line with best practices in order to build market confidence and drive liquidity.

He added that they will concentrate on information dissemination, including pre-trade, trade and post-trade data to promote transparency, as well as providing general market information among others.

Incorporated on January 6, 2011, FMDQ was licensed on November 6, 2012 by the Securities and Exchange Commission, SEC, to perform the function of OTC market in the Nigerian capital market.

It is a securities exchange for listing and trading of fixed income products and plain-vanilla interest rate and currency derivatives to offer financial security.

Its shareholders include the Central Bank of Nigeria, Financial Market Dealers Association, FMDA, the Nigerian Stock Exchange through NSE Consult Limited and the 25 commercial banks and three discount houses.

21 banks and three discount houses make up its trading members and money market instruments listing members, while top SEC-registered capital market issuing houses make up the bond listing members.

Some of its responsibilities include promotion of listing of fixed income securities; implementation of trading systems, the urgent one being the fixed income trading system; development of credible benchmarks, indices and forewarning of market risk; formulation of market self-regulatory rules, business norms, professional ethics and supervision of the implementation and supporting advocacy in financial markets legislation and improvement of accounting treatment and taxation rules for secondary market.