The FMDQ OTC Securities Exchange (FMDQ), with a vision of attaining a leadership position in Africa in the Fixed Income and Currency Markets by 2019, has launched 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.
As stated by a statement from FMDQ, the unique initiative, where fixed income dealers of NBFIs can trade bonds, commercial papers (CPs) and Treasury Bills (T-bills) in the FMDQ market, was created from the identification of an innovative opportunity for the much-needed participation of NBFIs in the Nigerian fixed income market.
The DMS market, the report noted, 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.
It explained that 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 while NBFIs would contribute to the development of the Nigerian DCM and indeed leverage on the 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, FMDQ explained that 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.”