THE Nigerian Stock Exchange (NSE) has affirmed that the kick-off of its retail bond trading on Friday would offer low net-worth investors opportunity to invest in bonds and diversify its portfolio accordingly.
The NSE officially commenced retail trading programme on fixed income securities on Friday, February 1, 2013, with investors taking up 510,000 units of fixed income instruments valued at N600,000 in 13 deals.
The transaction cut across the three fixed income asset classes listed on the NSE’s official list, which include the FGN bonds, State Government bonds and corporate bonds.
The NSE’s Chief Executive Officer, Oscar Onyema, while addressing journalists at the end of transaction on Friday, announced that the volume recorded was impressive, urging Dealing member firms of the Exchange to assist in getting more of their clients to partake in the fixed income market through the newly introduced retail window.
“We want to appeal to you to reach out to your clients and inform them that trading on fixed income securities has commenced today. Though the number we saw today was small, but I am sure that it can only get better as patronage improves,” he said.
He expressed optimism that it would drive activities in the primary market, adding that the commencement of retail bond trading will enable low net-worth investors enjoy the numerous benefits of investing in bonds.
“We are all excited that we have another product to trade and offer our client access classes to get proper diversification. As you know, we have about 13 trades totaling about a little over N600, 000. It is a small beginning but it proves the concept that people can do bond trading in small units and people can actually take position because it cross market makers and the broker dealers that actually participate in the market,” he said.
On whether the retail bond trading replaces the Over-The-Counter (OTC) trading on the Exchange, he said, “no, what we believe is that, this offering is complimentary to what we have in the OTC market. The OTC market is very institutional; the ticket sizes are very much bigger. What we are actually doing is to bring in the retail participant into the fixed income market.”
The NSE boss explained that the Exchange is only offering trading on bonds that are listed on the Exchange that includes Federal Government bonds, state and corporate bonds adding that if the NSE have natural offering coming in, it can do more volumes.
He, therefore, advised retail investors to take position in the market, noting that NSE have a viable platform that allows them to diversify their portfolios and as well manage the risk of exposure into the capital market using well exposed channels.
“We expecting that this will drive activity in the primary market especially from the corporate especially now that they know that you can participate from the retail perspective. Fixed market making platform would allow debt markets participants to trade NSE listed debt instruments issued by government and corporations transparently, stressing that it would complement the over-the-counter (OTC) bonds market that had been existing in the country,” he said.
With the recent appointment of six market makers that will facilitate retail trading in bonds on the Exchange, Onyema explained that the days bonds were considered exclusive preserve of institutional Investors and high net worth individuals were over, as low net worth investors would now have access to bonds on the floors of the Exchange.
According to him, investors buying the bonds would enjoy low risk, fixed and regular income, access to various types of bonds including governments and corporate bonds, capital appreciation and opportunity of free entry and exit.
The six market makers include Capital Bancorp, DunnLoren Merrifield, Greenwich Securities, Cordros Securities, FSDH Securities and GTB Securities Ltd.