August OTC FX Futures Mature With $152million Settlement

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The second OTC FX Futures Contract, “NGUS AUG 24 2016” matured today with notional $152.48 million settlement by the Central Bank of Nigeria, according to information from the Financial market Dealers Quote (FMDQ).

A new 12-month contract, NGUS AUG 16 2017 at the rate of $/₦241 has also been offered by the CBN.

The Naira-Settled OTC FX Futures contracts are essentially non-deliverable Forwards (i.e. contracts where parties agree to an exchange rate for a predetermined date in the future, without the obligation to deliver the underlying US Dollar (notional amount) on the maturity/settlement date).

Upon maturity, both parties are assumed to have transacted at the Spot FX market rate. OTC FX Futures contracts are cash-settled in Naira and the differential between the contract rate and the Nigerian Inter-bank Foreign Exchange Fixing (NIFEX) Spot rate on the maturity day determines the settlement amount, i.e. the gain/loss inherent in the contract.

The Naira-settled OTC FX Futures market kicked off on June 27, 2016, with the Central Bank of Nigeria as the pioneer seller of the OTC FX Futures contracts, offering non-standardised amounts for different tenors, from one month through to 12 months to Authorised Dealers, who in turn offer same to customers with trade-backed transactions or who may trade same with other Authorised Dealers; settling on bespoke maturity dates.

FMDQ OTC Securities Exchange acts as the OTC FX Futures Exchange, organising the smooth running of this market through its System, the FMDQ OTC FX Futures Trading & Reporting System, the OTC FX Futures Market Framework and FMDQ OTC FX Futures Market Operational Standards, serving to provide the requisite transparency and governance for the success of the market.