The FMDQ OTC, the official market for bonds, treasury bills and forex trading has approved the suspension of the FMDQ Spot FX Closing Rate with immediate effect.
The FMDQ in a press release signed by Jumola Olaniyan, the Divisional Head Market Development & Regulation, explained the reason for the suspension was due to the “transparency and liquidity challenges, and prevalent disequilibrium currently being faced in the Nigerian Foreign Exchange”.
Rather than publish the daily Spot FX closing rates, the FMDQ will now reference the last available executed trade on the Thomson Reuters NGN=D1 module at 2:00 PM and will be referenced the “CBN Closing Rate”.
This remarkable development is perhaps the first official sign that the flexible exchange rate introduced by the Central Bank of Nigeria is broken. The Managing Director of the FMDQ, Koko Onadele, had rebuked the CBN for fragmenting the exchange rate market with its tight control of forex prices and supply.
This latest press release follows a situation where the country now has about 7 official/unofficial exchange rate making the FMDQ spot quote basically irrelevant.
FMDQ OTC Securities Exchange (FMDQ) has introduced the specialist category of its Dealing Membership category for non-bank financial institutions (NBFIs) to act as market makers in the fixed income market. They are to be known as Dealing Member Specialists (DMSs).
According FMDQ, participation of the NBFIs, which are the investment banking firms and securities dealing firms, will generate additional liquidity to the Nigerian fixed income market and serve as an avenue for effective and efficient retail participation in this market.
The company said this unique initiative, where fixed income dealers of NBFIs can trade Bonds, Commercial Papers (CPs) and Treasury Bills (T.bills) in the FMDQ market, stemmed from the identification of an innovative opportunity for the much needed participation of NBFIs in the Nigerian fixed income market.
“The DMS market will be one where the participants, DMSs, will make market in T.bills (to begin with) and FGN Bonds, providing two-way quotes to other DMSs and one-way quotes to clients (institutional and retail), thereby generating the required fixed income market liquidity in these factions of the investor market. The DMS market will operate like the existing FMDQ Dealing Member (Banks) market with a view to the full integration of the Dealing Member (Banks) and DMSs markets at some point in the future. Forward-thinking and resourceful NBFIs, via this new membership category, will contribute to the development of the Nigerian debt capital market (DCM) and indeed leverage on this potentially highly beneficial business opportunity,” the platform said.
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