Derivatives 2025

NIGERIA Law and Practice Contributed by: Fred Onuobia, Michelle Chikezie, Chima Uzochukwu-Obi and Anita Ebbi, G Elias

FEMMPA establishes an autonomous FX market and provides for the appointment of authorised dealers. With the CBN’s abolition of exchange rate segmenta - tion and the re-introduction of the “willing buyer–will - ing seller” model in June 2023, transactions in the FX market are completed with the rate mutually agreed between the purchaser and the authorised dealer con - cerned. For its part, the Revised FX Guidelines recognise the Electronic Foreign Exchange Matching System (EFEMS) introduced by the CBN in October 2024 and mandate that all interbank FX transactions are to be completed on the EFEMS. The Revised FX Guidelines further provide that the pricing of foreign exchange transactions shall be undertaken on the EFEMS. All foreign exchange transactions completed by author - ised dealers must be recorded by the dealers on a processing system and reported to the CBN within ten minutes of the transaction. Except for those that may be imposed by the respec - tive commodities exchanges, there are no unique rules applicable to leveraged retail spot commodities transactions. However, the Derivatives Trading Rules (paragraph 10) require the exchange to liaise with the CCP to determine the applicable leverage relevant to each type of derivatives contract and the same should be disclosed to the SEC within 24 hours. As stated in 1.1 Overview of Derivatives Markets , the primary federal government agencies involved in the regulation of derivatives transactions and the deriva - tives market are the SEC and the CBN. These national agencies regulate derivatives transactions by provid - ing rules and regulations on general requirements, reporting requirements and membership require - ments, among other things. The SEC has the legislative mandate under the ISA 2025 to register derivatives and regulate the deriva - tives markets. The SEC is authorised to issue regula - tions concerning derivatives, derivatives markets or 3. Regulation of Derivatives 3.1 National 3.1.1 National Regulators

business, derivatives exchanges, derivatives market infrastructure, derivatives business operators, trade association of derivatives business operators, and preventing unfair derivatives trading practices. In practice, the SEC’s regulatory focus is on exchange- traded derivatives contracts. The SEC prescribes rules and guidelines to regulate dealings in such exchange-traded derivatives contracts (even though some reporting requirements exist for OTC contracts). The CBN, on the other hand, particularly regulates dealings in derivatives contracts by financial insti - tutions, which, when entered into by these financial institutions in their capacity as principal are typically OTC derivatives contracts. The statutory and regula - tory jurisdictions of these primary regulators are clear- cut, except where the derivatives transaction involves financial institutions and exchange-traded derivatives contracts. In circumstances where both regulators have jurisdiction over derivatives market participants, the stipulated guidelines issued by both regulators will – to the extent applicable – regulate such transaction. 3.1.2 Clearing The Derivatives Trading Rules (paragraph 6) provide that all standardised OTC derivatives contracts must be traded on an exchange and all exchange-traded derivatives contracts must be cleared by a CCP reg - istered with the SEC. The CCP Rules further provide a detailed framework for the clearing of standardised and exchange-traded derivatives, including comprehensive risk manage - ment, collateral requirements and margin require - ments, among other things. Derivatives traded on exchanges are generally centrally cleared and the clearing and settlement arms of the exchange (eg, FMDQ Clear and NG Clearing) act as CCPs for deriv - atives traded on its platforms. As a result, clearing requirements are particular to exchange-traded deriv - ative contracts (including standardised OTC deriva - tives contracts). 3.1.3 Mandatory Trading The Derivatives Trading Rules require that all stand - ardised OTC derivatives contracts be traded on an exchange. The Derivatives Trading Rules make no exceptions in this regard.

61 CHAMBERS.COM