By Nkiruka Nnorom

Nigerian Stock Exchange, NSE, has disclosed plan to commence trading in financial derivative in 2016.

The proposed introduction is in fulfillment of the exchange’s decision to introduce five asset classes in five years on the assumption of office by Oscar Onyema as the NSE’ Chief Executive Officer.

A financial derivative is one of the financial instruments used in any sophisticated stock market securities all over the world. The financial instrument’s price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties.

Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes

“A lot of work is going on,” Onyema said, adding: “The market is considering futures and options on both single stocks and equity indexes among financial derivatives”.

The Nigerian economy is “highly diversified” and there won’t be a “tremendous impact” from falling oil prices, Onyema said. Investors outside the country are projected to return following the vote in about two months, according to him.

It would be recalled that Onyema had while outlining the road map to be adopted by the Exchange to deepen the capital market in 2011 said that the Securities and Exchange Commission, SEC, had given the NSE the approval to undertake Index/Exchange Traded Fund, saying that the Exchange would also consider addition of Options and Derivative in two years time.

“Today, we offer equities and bonds in our stock market. Just recently, the Securities and Exchange Commission (SEC) approved for Exchange to undertake Index/Exchange Traded Funds.

So in addition to those three, we will be adding options – both equities options and index options and then the last one we are adding is financial features.