FMDQ Launches Dealing Member (Specialists) Membership for Fixed Income Trading. FMDQ OTC Securities Exchange (FMDQ), with a vision of becoming No. 1 in Africa in the Fixed Income and Currency Markets by 2019, maintains its commitment to develop the Nigerian financial markets by implementing initiatives directed towards the achievement of this goal. In line with its desire to, not just integrate the Nigerian financial markets, thereby improving the markets’ network effects, but to also promote market liquidity, with particular focus on the debt capital market (DCM), FMDQ is proud to launch its Dealing Member (Specialists) (DMSs) category of membership, for non-bank financial institutions (NBFIs) to act as market makers in the FMDQ fixed income market. Participation of the NBFIs, typically 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.

This unique initiative, where fixed income dealers of NBFIs can trade Bonds, Commercial Papers (CPs) and Treasury Bills (T.bills) in the FMDQ market, was birthed 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 Dealing Member (Specialists) 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 DCM and indeed leverage on this potentially highly beneficial business opportunity. FMDQ currently has twenty-three (23) institutions that have successfully completed the first phase of the membership application process and prudently positioning to take advantage of this opportunity.

In 2015, FMDQ along with over 35 NBFIs, finalised the draft Framework covering the DMS Project Roll-Out Plan, minimum registration requirements, operational modalities and Trading System requirements for the DMS market and proceeded to implement the various action points, with the activation of the new membership category in December 2015.

As part of the implementation exercise for this Project roll-out, a robust web-based proprietary trading system, FMDQ Q-Deal, has been deployed to facilitate the trading of fixed income securities by the DMSs. With integrated multi-trading style functionalities, the Q-Deal features anonymous and bilateral trading capabilities and enhances accessibility, price formation, pre- & post-trade price discovery and market surveillance. Incorporated into the system is a frontier trade order management solution that will enable DMSs monitor their trading position and profitability on a real-time basis.

Furthermore, a 2-day Simulation Workshop (scheduled for Wednesday, March 23 & Thursday, March 24, 2016) is being organised for the twenty-three (23) institutions that successfully completed the initial membership application to become DMSs. The Simulation Workshop is a crucial step in the implementation process as it provides participants with a trial-run of the trading system, FMDQ Q-Deal, a glimpse into how the DMS market will operate and most importantly, an avenue for feedback and recommendations to ensure a seamless activation of the market at go-live. The CEOs of the DMSs will witness the Simulation Workshop. Following this Workshop, a 1-month trial period, when DMSs will “dummy” trade, will begin, to help the DMSs further entrench their understanding of the FMDQ Q-Deal and the DMS Market Rules ahead of the commencement of live trading on T.bills (and later FGN Bonds) on the FMDQ platform.

The FMDQ DMS is a subset of the FMDQ Dealing Member category of membership which also consists of the Central Bank of Nigeria (CBN) licenced banks as the primary subset in this membership category. The Dealing Members, combined, will make market in the products traded on the OTC Exchange, under the efficient governance of FMDQ, serving to promote the integrity of the market, thereby improving, deepening market liquidity and ultimately developing the Nigerian DCM market and overall economy.

FMDQ, with the support of the Securities and Exchange Commission (SEC), Nigeria, continues to innovate to ensure its markets maintain high levels of transparency, governance and integrity, advocating investor protection and supporting its long-term ability to continue to create value for all its stakeholders. Through its unique initiatives, the OTC Exchange will deliver on its mandate to develop the Nigerian DCM, through empowering the DCM ecosystem to be innovative and credible, whilst focusing on promoting and enhancing the liquidity of fixed income markets.