By GODFREY OBIOMA

The possibility of trading bonds on the floor of the Nigerian Stock Exchange formed the subject of discussion between the self -regulatory organization and the Financial Market Dealers Association.

BusinessDay learnt that NSE claim that the fixed income securities can be traded on its platform called for facility visit by FMDA.

After the visit, it was gather, FMDA was dissatisfied with their findings and urged NSE to visit Primary Market Dealers  to study how it works and update theirs.

The claim by NSE that bonds are already trading on the secondary market because Federal Government Bond are listed on the floor of the NSE, analyst  said is not really valid as NSE  trading facilities do not have two-way quote. Investors for now either buy or sell based on previous day’s prices unlike two -way quote where investors throw in their offer and bid prices the same day.

Meanwhile the Financial Market Dealers Association has established various work groups that should allow all players to participate. These include work group on Bonds, Equities, derivatives and real estate.

Kunle Ezun Head, Research FMDA said the idea was to create a platform for every player in the market. It was gathered that stock brokers see the idea as an opportunity to participate in bond transactions as many are said to be working to diversify their investment base.

Ezun said since the requirement for brokers to participate in bond trading, is to join the association, a good number of them are making frantic efforts to join the group.

To broaden the financial market, the association is planning to introduce some financial products. These include interest rate derivative. The association was instrumental in the creation of the forward contract in foreign exchange trading which is already being practiced.

Forward trading in foreign exchange allows dealers to buy foreign exchange at current rate for delivery in future.  The product was meant to reduce pressure on the Naira. According to BGL Securities, forward rates reflect the expectations of forward market participants on the changes of the spot rate during the specified interval. Where the forward rate and the spot rate are different only by small spread, the company said, forward market participants do not expect much change in the price of a currency over the given period of time.

Forward contracts are used ultimately as hedge against foreign exchange risk.

Source: Businessday