The introduction of the daily quotation list by the Financial Market Dealers Quotation (FMDQ) has brought some sanity into the Over-the-Counter trading of the fixed income instruments, Business Day investigations have revealed.
Consequently, it has become easier for financial market regulators to close in on the likely under-the-table deals of the buy-side dealers of fixed income securities and instruments, particularly the prices they report in the OTC deals.
Some analysts said yesterday that the FMDQ searchlight was expected to bring transparency into the market with the attendant deepening of the market since, according to them, it would engender spirit of competition. This is even as some banks accuse FMDQ of arm-twisting.
In the OTC market, Pension Fund Administrators (PFAs), fund managers and corporate trustees are among the major buy-side dealers of these asset classes.
Before the take-off of FMDQ OTC plc late last year, transactions and rates around FGN bonds, agency bonds, sub-national bonds, corporate bonds, supranational bonds, FGN Eurobonds and corporate Eurobonds were shrouded by those on the buy-side.
“PFAs use pension money to buy assets. The question is, at what price did they buy? The FMDQ has helped to expose the prices at which the bonds are being bought and sold. This further guides the regulators to ensure transparency,” Bola Onadele, managing director/chief executive officer, FMDQ OTC plc, told BusinessDay.
While FMDQ OTC plc insists on transparent ways of doing deals around these financial assets in the OTC market, its activities are now being termed an arm-twisting reform by most banks’ treasury staff, who would have loved the status-quo to remain.
But Onadele insists that the reform is meant to sanitise the market. According to him, the implication is that the PFAs, for instance, who currently sit on assets worth over N4 trillion, can now easily be sanctioned by the National Pension Commission (PenCom) when it observes the prices/rates in relation to these asset classes do not conform to the quoted rates by FMDQ OTC plc.
“The FMDQ is collaborating with PenCom to ensure that the pension industry regulator gets live feed on bond trading. The online trading platform will aid PenCom to monitor the deals of the PFAs and ensure the prices they quote are accurate,” Onadele said.
The FMDQ daily quotation list (DQL) contains market and model prices/rates of foreign exchange products, fixed income securities and instruments in the Over-the-Counter (OTC) market. This is aimed at enhancing the global competitiveness, transparency, liquidity and diversity of Nigeria’s N12 trillion fixed income market.
“We are meeting with the major buy-side of assets classes to evaluate what needs to be done to boost confidence in the OTC market. FMDQ has helped regulators in valuing the market and also helped investors to value investments. Market transparency is the major achievement in this market, not only to regulators but to the investors. In the past, nobody had the responsibility to disseminate information about the market for people to know –like you see in the equities market,” Onadele said.
Iheanyi Nwachukwu
