Breaking News
Translate

FMDQ, Dutch firm partner on clearing structure in Nigeria

Kindly Share This Story:

By Nkiruka Nnorom

FMDQ Clear Limited, a wholly-owned clearing and settlement subsidiary of FMDQ OTC Securities Exchange, and Frontclear, a Netherlands-based development finance company, are partnering to facilitate a clearing structure to strengthen the over-the-counter, OTC, market liquidity with the support of a settlement guarantee fund.

The collaboration, according to FMDQ, is the culmination of a long-standing working relationship focused on improving how the Nigerian OTC financial market functions and follows on an initial introduction through the International Capital Market Association, ICMA, of which FMDQ is a full member and Frontclear is a long-standing partner.

FMDQ Clear will be backed by Frontclear’s core financial guarantee product, thereby improving the credit worthiness of participating counter-parties and reducing initial set-up costs, FMDQ said in a statement.

“The Frontclear guarantee will, in practice, function like a settlement/credit guarantee fund typical to more developed financial markets. Upon default of a clearing member, Frontclear guarantees any mark-to-market losses incurred by any other counter-party clearing or dealing member(s), and up to a pre-agreed maximum amount.

“With this guarantee fund, FMDQ Clear can significantly improve access to a breadth of financial products such as interest rate and currency derivatives, and repurchase agreements (repos), especially for smaller dealing members who may have been previously excluded because of perceived counter-party credit risk.

“FMDQ Clear, which will be the first of such infrastructure in Africa, with a third-party settlement guarantee arrangement that improves on settlement finality, is positioned to becoming a world-class central clearing house, with robust risk waterfall supported by settlement guarantee fund,” the statement added.

Kindly Share This Story:
All rights reserved. This material and any other digital content on this platform may not be reproduced, published, broadcast, written or distributed in full or in part, without written permission from VANGUARD NEWS.

Disclaimer

Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.
Do NOT follow this link or you will be banned from the site!