What Does NG Clearing Do?
As a Financial Market Infrastructure (FMI) NG Clearing plays the role of a Central Counterparty (CCP) in Nigeria’s financial ecosystem.
Below are some of the key roles we play.
1. Clearing and Settlement of derivative contracts
Through our robust, technology-enabled processes, we ensure trade obligations are fulfilled by trading parties. We clear and settle (making sure the seller gets paid and the buyer gets the traded asset) across multiple asset classes and exchanges.
2. Risk Management
For every trade/contract, we actively interpose ourselves between the buyer and the seller. We become the seller to the buyer and the buyer to the seller. This ensures that the trading party is not exposed to risk of default from another trading party.
3. Collateral Management
To effectively reduce the risk of default (the risk that a trading party will not pay or deliver the traded asset) by trading parties, we collect and manage financial resources (collateral) to cover settlement obligations. By doing this even if trading parties do not fulfill their part of the bargain, the collaterals are utilized to ensure the transaction is completed. To arrive at an optimal level of collateral we simulate a wide range of potential stress scenarios.
NG Clearing is able to offer these services because we are licensed as a Central Counterparty(CCP) by the Securities and Exchange Commission. If you wish to know what a CCP entails, click here.