CBN, FMDQ, FMDA Propel Market Confidence, Unveils FMDQ’s Q-ex Platform for the Fixed Income Market

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June 11, 2018/FMDQ OTC

Hearty congratulations are undeniably to be in order for the Central Bank of Nigeria (CBN), FMDQ OTC Securities Exchange (FMDQ or the OTC Exchange) and the Financial Markets Dealers’ Association (FMDA), the association of FMDQ Dealing Member (Banks), as a most commendable feat has been achieved in the fixed income market – Straight-through-Processing (STP) for the settlement of fixed income trades! On Friday, June 8, 2018, FMDQ, with the critical and commendable support of the CBN and the FMDQ Dealing Member (Banks), successfully deployed a fixed income market STP settlement solution through its Proprietary Market System – FMDQ’s Q-ex – a customised fully-integrated multiasset trading system with attendant post-trade services capabilities. FMDQ’s Q-ex has been integrated with the CBN’s Scripless Securities Settlement System (S4) to provide STP capabilities for efficient settlement in the fixed income market, improving the efficiency of the trading, reporting and settlement processes, whilst further developing, in no small measure, the Nigerian financial markets.

Q-ex provides an unrivalled means through which trades executed by its Members (currently the Dealing Member (Banks), are reported and subsequently settled, with minimal to no human intervention, via the respective channels.

The deployment of the FMDQ Q-ex Settlement Solution operated by FMDQ Clear Limited, a wholly-owned subsidiary of FMDQ, will essentially streamline business processes to reduce friction along the fixed income trades settlement value-chain, boost productivity of the market participants and promote efficiency of post-trade services. It can be argued that the Nigerian fixed income market has not been performing at its optimum, as the market has been marked with bouts of low productivity, inefficiency and invariably, settlement defaults, all of which would likely have marred the market’s integrity and significantly lowered investor confidence.

With integrity being one of the key ingredients for a successful market, as adjudged by global counterparts, the achievement of STP in the fixed income market via the integration of Q-ex and the CBN’s S4 could not have come a moment too soon, as this integration sets a clear and certain path for market-wide confidence in the Nigerian fixed income settlement processes, and by extension, the fixed income market, to be restored.

The integration also makes possible, unparalleled visibility and transparency of the post-trade workflow (settlement obligations, reconciliations etc.) amongst FMDQ Members and their trading counterparties – another must for a successful market.

From informing the customisation of its applications and systems to allowing for seamless and robust integration to Q-ex, the CBN has again demonstrated its progressiveness and affirmed its interest in re-engineering the Nigerian financial markets towards achieving global competitiveness.

This is highly commendable, and the market applauds the CBN for its market development initiatives. On the other hand, also key to the success of this initiative, has been the FMDA, who has provided an avenue for market engagements, ensuring effective and value-adding communication with FMDQ and has remained dogged in its desire to see through the delivery of an automated clearing and settlement process that works for the market.

According to Bola Onadele Koko, Managing Director/Chief Executive Officer at FMDQ, “the development of FMDQ’s Q-ex and its subsequent linkage to the CBN’s S4 is one of the key medium- to long-term initiatives of FMDQ, aimed at making the Nigerian financial market operationally excellent – delivering on the “O” in FMDQ’s GOLD Agenda.

With the continued collective efforts of the CBN, the Securities & Exchange Commission and indeed, other key regulators and stakeholders, we at
FMDQ, are confident that the potential of our domestic markets, acting as a catalyst to propel economic growth, shall be realised.

To build and sustain a well-functioning market, it is hoped that all hands remain on deck even as FMDQ continues to re-affirm its commitment to promote a world-class financial market operating in alignment with international best practices.”

Following the successful establishment of the first clearing infrastructure in Nigeria – FMDQ Clear Limited – and the official launch, last week, of the Nigerian Green Bond Market Development Programme in partnership with Financial Sector Deepening, Africa and Climate Bonds Initiative, the OTC Exchange continues to demonstrate its unrelenting commitment to its mandate of transforming the Nigerian financial markets, championing game-changing initiatives and collaborating with key market stakeholders to ensure the realisation of its market development objectives, for the ultimate benefit of the Nigerian economy.

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