FMDQ CMC Update Report Jumoke Olaniyan - PowerPoint Presentation

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FMDQ CMC Update Report

Jumoke Olaniyan

Group Head, Market Development

November 25, 2015

Outline

Part 1

FMDQ

OTC

Market Sizing

2

Part 2

Nigerian Debt Capital Market Transformation Governance and Structure

3

Part 3

Specialist Dealing Member (SDM) Project Plan

4

Part

4

FMDQ

Listings and Quotation

5

Part

5

FMDQ Market Development

Workgroup (FMDW)

6

FMDQ Market Surveillance

FMDQ OTC Market Sizing

Other

bonds include Agency, Sub-national, Corporate and Supranational

Bonds

Source:

 FMDQ Data Portal: Figures reported by Dealing Members on a week ending basis

Nigerian Debt Capital Market Transformation

Governance and Structure

Steering Committee (

SteerCo

)*

Transformation Committee

(TransCo)

Project Management Office (PMO)

Regulation Consolidation

Chair, Chinua Azubike

Product & Infrastructure Innovation

Chair, Dipo Odeyemi

Market Liquidity & Enhancement

Chair, David Adepoju

Investor/ Issuers & Intermediaries Engagement

/Education

Chair, Kobby

Bentsi

Enchill

Sub-Committees(SubCos)

Mary

Uduk

, Director,

Investment Management (SEC)CBN Director, Financial Markets Dept (Emmanuel Ukeje)**PenCom Head, Investment Supervision (Ehimeme Ohioma)FMDQ MD/CEO (Bola Onadele. Koko)Bolaji BalogunChuka Eseka

Abdulkadir Abbas (Dep. Director, Securities Offering, SEC)Kemi AwodeinKobby Bentsi-EnchillVice Chairman, FMDQ Market Development Workgroup (David Adepoju)

Emmanuel Etaderhi (Chair, FMDQ Govt Relations)Supported by Sonnie Ayere, Yewande Sadiku & Michael LarbieTransformation Manager (PMO)Supported by Global Capital Market Experts (India, South Africa & Malaysia)

Market

CBN

Custodian PenComPFACSCSFMDAFMDQ MDG (Adebola Lawal)FMDQ MSG (Segun Akintoye)

MarketNMRC Infrastructure BankDevelopment Finance Institutions (DFIs)AIHNFMDQ MDG (Jumoke Olaniyan)

Market PenComCBNFIRS NAICOMNIAFMDQ MRG (Olamide Niyi-Afuye)

MarketCustodian/TrusteesPFARating Agencies DMOCommercial BanksCapital Market AssociationsFMDQ BDG (Tumi Sekoni)

Planning Committee /FMDQ/ Consultant representatives

Representatives

*FMDQ MD/CEO (Project Sponsor), members of DCM Visioning Team and Transformation Committee Members will interface with other regulatory agencies

**Chairman, FMDQ Market Development Workgroup

FMDQ Listings and Quotation - 2015

Category

Instrument

Value (

₦ ‘bn)

Coupon (%)

Date Listed

FGN Bonds

All FGN Bonds

4,846.82

Jul

7, 2015

Sub-Nationals

Benue State Government Bond

5.00

16.5

Sep 7, 2015

Cross River State Government Bond (Series 1)

8.00

17

Nov 16,

2015

Corporate

United Bank for Africa (UBA) PLC Series I

30.50 16.45Mar 19, 2015Stanbic IBTC Bank PLC Series I (Tranche A)15.44

13.25Apr 17, 2015

Stanbic IBTC Bank PLC Series I (Tranche B)0.10182 day T.Bills + 1.20Apr 17, 2015

FCMB Financing SPV PLC Series I

26.00

14.25May 11, 2015Fidelity Bank PLC

30.00 16.48Sep 7, 2015

NMRC PLC Series I 8.00

14.9Sep 7, 2015Commercial PapersWema Bank PLC

8.15

15.251

Sep 16, 2015

Nigerian Breweries PLC

17.7112.15861Nov 2015

Note

1

Discount Rate

SDM Project Plan

PLANNING

Final SDM Framework

Application Process

One day Simulation Workshop

2WQ Simulation

testing (Dummy trading Dec 2015 – Jan 2016)

December

IMPLEMENTATION

Q-Deal

©

User Acceptance

Test

Payment of Membership Dues

Provisional Licencing

Assignment of Initial

Trading

Collateral

February

T.bills Trading Only

FMDQ Clearing House

Daily End of Day Close-Out

MODIFICATIONS

Settlement Bank Sign-

O

ns

Q-Deal

©

Upgrade:

Real-Time MTM

Liquidity Providers (DMs) Integration

Q2 2016

T.bills Trading with

Settlement Bank Services

Client Services

E-Bond Price Discovery

CLOSING

Full Licencing

Revised Trading Collateral Requirements

Q3 2016

Variable Licencing

T.bills Only

T.bills + Bonds

FMDQ Market Development Workgroup (FMDW)

Initiative

Update

FMDQ Market Development Workgroup (FMDW)

FMDQ activated the Market Development Workgroup, which is challenged to shape reforms in the Nigerian over-the- counter (OTC) market. The Workgroup presents a platform on which all OTC market development programs can be coordinated

The FMDQ Market Development Workgroup (FMDW), which is made up of senior representatives from market associations, trade groups and financial market infrastructure providers, is responsible for coordinating and monitoring all FMDQ OTC market development activities

Consequently, the Board mandated Management to develop a Market Development Workgroup Framework and activate same. To this end Management documented a Market Development Workgroup Framework highlighting the Chair, Board Markets and Technology (BMTC) as the Chairman of the Workgroup

The inaugural meeting was held and the Workgroup Members reviewed its Terms of Reference and received an update on FMDQ market development activities. The Workgroup expressed satisfaction with the market development focus and efforts of the Board and Management of FMDQ.

The next meeting is scheduled to hold fourth quarter of 2015, to develop a comprehensive Market Development Initiatives Report for 2016 which will be submitted to FMSC ahead/during the Bankers’ Committee Retreat

FMDQ Market Surveillance

Initiative

Update

Implementation

of E-bond Infractions and Penalties Guide –

See Appendix

The number of Dealing Members (DMs) that recorded E-Bond trading infractions, received warning letters and cash sanctions dropped steadily through the months from seventeen (17) in April 2015 to a record low of three (3) in September 2015. There was however a slight increase to Six (6) DMs in October 2015

There was an increase in the number of DMs without an E-bond trading infractions which rose from Three (3) DMs in April 2015 to Nine (9) DMs in September 2015. This number decreased marginally to Eight(8) DMs in October 2015

FMDQ plans to send out congratulatory mail to DMs, on their improved level of compliance

A meeting with the Bonds and Money Market Workgroups was organised by FMDQ where the arbitrary widening of market spreads and market volatility was discussed. However, this trend persisted especially in the Treasury bills market

FMDQ is currently testing surveillance data and hopes to commence the monitoring of infractions on maintenance of standard spread and replenishment of quotes in the market once this is finalised. This is estimated to be deployed in January 2016. This surveillance tool should reduce the prevalence of arbitrary widening of market spreads

A risk assessment pre-inspection questionnaire has been developed for DMs. Examination and inspection is expected to commence soon

Financial sanctions for the months of

August – October

2015 have been debited for

Trading infractions

APPENDIX

Market Surveillance Summary – August 2015

Summary of E-Bond trading infractions for August, 2015

Dealing Member

Compliance Ranking

A

B

C

Total Infractions

Infractions with Cash Sanction

Cash Sanction (N)

Access Bank PLC

1

-

-

-

-

-

-

Diamond Bank PLC

1

-

-

-

-

-

- Ecobank Nigeria Limited1

- - - -

-

-

First Bank of Nigeria Limited1 - -

- - -

- Rand Merchant Bank Limited1

- - - -

-

-

Skye Bank PLC

1

- - - -

-

-

Stanbic IBTC Bank PLC

1

-

-

-

-

-

-

Wema Bank PLC

1

-

-

-

-

-

-

Zenith Bank PLC

1

-

-

-

-

-

-

Citibank Nigeria Limited

10

1

-

-

1

-

-

Enterprise Bank Limited10 - 1 - 1 - - Guaranty Trust Bank PLC10 1 - - 1 - - Standard Chartered Bank Nigeria Limited10 - - 1 1 - - Sterling Bank PLC10 - 1 - 1 - - United Bank for Africa PLC10 1 - - 1 - - Fidelity Bank PLC16 2 - - 2 - - FSDH Merchant Bank Limited16 1 1 - 2 - - Kakawa Discount House Limited16 2 - - 2 - - Keystone Bank Limited16 2 - - 2 - - Union Bank of Nigeria PLC20 3 - - 3 1 500,000.00 Coronation Merchant Bank Limited21 6 1 - 7 1 500,000.00 Heritage Banking Company Limited22 2 1 4 7 1 500,000.00 First City Monument Bank Limited23 8 - 4 12 2 1,000,000.00 Unity Bank PLC24 9 2 4 15 2 1,000,000.00 Total       3,500,000.00

AResponding to less than 35% of mandatory RFQs BDelay in submitting weekly trade reports CFailure to provide firm quotes for all benchmark securities by 10.00AM -Nil     

Source: FMDQ Market Services

Market Surveillance Summary – September 2015

Summary of E-Bond trading infractions for September, 2015

Dealing Member

Compliance Ranking

A

B

C

Total Infractions

Infractions with Cash Sanction

Cash Sanction (N)

Access Bank PLC

1

-

-

-

-

-

-

Diamond Bank PLC

1

-

-

-

-

-

- Ecobank Nigeria Limited

1 - - - -

-

-

Rand Merchant Bank Nigeria Limited1 -

- - -

- - Skye Bank PLC

1 - - -

- -

-

Standard Chartered Bank Nigeria Limited

1

- - -

-

-

-

United Bank for Africa PLC

1

-

-

-

-

-

-

Kakawa Discount House Limited

1

-

-

-

-

-

-

Union Bank of Nigeria PLC

1

-

-

-

-

-

-

First Bank of Nigeria Limited

1

-

-

-

-

-

- Stanbic IBTC Bank PLC1 - - - - - - FSDH Merchant Bank Limited1 - - - - - - Zenith Bank PLC13 1 - - 1 - - Guaranty Trust Bank PLC13 1 - - 1 - - Sterling Bank PLC13 - 1   1 - - Fidelity Bank PLC13 - 1 - 1 - - Keystone Bank Limited13 - 1 - 1 - - Heritage Banking Company Limited13 - 1 - 1 - - Citibank Nigeria Limited19 2 - - 2 - - Wema Bank PLC20 2 1 - 3 - - Coronation Merchant Bank Limited21 7 - - 7 1 500,000.00 First City Monument Bank Limited21 6 - 1 7 1 500,000.00 Unity Bank PLC23 18 1 14 33 2 1,000,000.00 Total       2,000,000.00 AResponding to less than 35% of mandatory RFQs BDelay in submitting weekly trade reports 

CFailure to provide firm quotes for all benchmark securities by 10.00AM -Nil      Source: FMDQ Market Services

Market Surveillance Summary – October 2015

Source: FMDQ Market Services

Summary of E-Bond trading infractions for October, 2015

Dealing Member

Compliance Ranking

A

B

C

Total Infractions

Infractions with Cash Sanction

Cash Sanction (N)

Access Bank PLC

1

-

-

-

-

-

-

Citibank Nigeria Limited

1

-

-

-

-

- -

Fidelity Bank PLC1 - - -

-

-

- First Bank of Nigeria Limited1

- - -

- - -

FSDH Merchant Bank Limited1 - -

-

-

-

-

Stanbic IBTC Bank PLC1 - -

-

-

-

-

Union Bank of Nigeria PLC

1

-

-

-

-

-

-

Zenith Bank PLC

1

-

-

-

-

-

-

Diamond Bank PLC

8

1

-

-

1

-

-

Ecobank Nigeria Limited

8

-

1

-

1

- - Rand Merchant Bank Limited8 1 - - 1 - - Skye Bank PLC8 1 - - 1 - - Wema Bank PLC8 1 - - 1 - - Coronation Merchant Bank Limited14 1 1 - 2 - - Kakawa Discount House Limited14 1 - 1 2 - - Sterling Bank PLC14 2 - - 2 - - United Bank for Africa PLC17 1 - 2 3 - - Guaranty Trust Bank PLC18 4 - - 4 1 500,000.00 Standard Chartered Bank Nigeria Limited19 5 - - 5 1 500,000.00 First City Monument Bank Limited20 6 - - 6 1 500,000.00 Keystone Bank Limited20 6 - - 6 1 500,000.00 Heritage Banking Company Limited22 1 1 5 7 1 500,000.00 Unity Bank PLC23 11 - 11 22 2 1,000,000.00 Total       3,500,000.00 AResponding to less than 35% of mandatory RFQs BDelay in submitting weekly trade reports

 CFailure to provide firm quotes for all benchmark securities by 10.00AM -Nil