Nigerian Exchange Group Plc · NSENG:NGXGROUP
Nigerian Exchange — NSE Derivatives Webinar
18 slides from Nigerian Exchange's conference presentation
Slide 1: Introduction To Exchange Traded Derivative
& Crubin Futures Introduction To Exchange Traded Derivative By: Charlie Rubin (Derivatives Consultant, USA)
Slide 2: Charlie Rubin
| Charlie Rubin Crubin Futures 35+ years in securities and commodities business Senior management of New York Stock Exchange and New York Futures Exchange – Responsible for modification of NYSE securities systems for NYFE CEO of a stock brokerage firm and a futures brokerage firm 20 years co
Slide 3: Outline
| Outline Crubin Futures 1 • An Overview of Derivatives 2 • Classification of Derivatives 3 • Differences Between Futures and Forwards 4 • Why these Derivatives are Beneficial • Commodities Derivatives 5 6 • Hedgers and Speculators 7 • Futures and Options 8 • Derivatives Impact 9 • Distribution of F
Slide 4: An Overview
| An Overview Crubin Futures Derivatives are contracts that derive their value from the performance of an underlying asset, event, or outcome—hence their name. Underlying assets can be : Stocks Bonds Commodities Currency Interest Rates Market Indices But derivatives can be dependent on almost any va
Slide 5: Classification Of Derivatives
| Classification Of Derivatives Crubin Futures Option Contracts An option is an agreement that gives the buyer Forward Contracts the right, but not the obligation, to purchase (a A forward contract is an agreement call option) or sell (a put option) a given between Two parties in which one party qua
Slide 6: Futures and Forwards Contracts
| Futures and Forwards Contracts Crubin Futures Differences How Futures Work Futures Forwards Traders can take futures positions by going long (buying) or short (selling). Whatever Traded on an exchange Private contract (bi- position taken by exposes the trader to changes 1. platform lateral contrac
Slide 7: Why these Derivatives are beneficial (Futures and / or Options)
| Why these Derivatives are beneficial (Futures and / or Options) Crubin Futures Differences How Futures Work Allows all customers / investors (institutional and retail) to: BUY individual securities or entire market with high leverage AND: NO interest payments NO downside or adverse market risk S
Slide 8: Why these Derivatives are beneficial Cont’d
| Why these Derivatives are beneficial Cont’d Crubin Futures Differences How Futures Work Hedging Allows asset managers and other investors to: Hedge positions to reduce and/or eliminate: • Market price risk • Currency risk Hedge 20%, etc. of portfolio – Sell stock index futures contracts or B
Slide 9: Commodity Derivatives
| Commodity Derivatives Energy Future (Crude oil) Crubin Futures Majority of derivatives trading are in products that are based on a financial underlining, such as FX rates, debt instrument and stocks. In contrast, trading in energy derivatives, and commodity derivatives in general, means that the u
Slide 10: Hedgers and Speculators
| Hedgers and Speculators Crubin Futures Differences How Futures Work Whole world of investors and traders are one or the other: Hedgers – avoid financial risk Speculators – take risks – to make profits Futures and Options accommodates both Can start with Hedgers, but need both: otherwise, n
Slide 11: Futures and Options
| Futures and Options Similarities: Crubin Futures Hedging and Leverage opportunities – Reduce or Eliminate market price risks Trade in similar size contracts which have an expiration date Position can be liquidated prior to contract expiration Open Interest (contracts Long = Short for each contra
Slide 12: Derivatives Impact
| Derivatives Impact Crubin Futures Derivatives create more trading activity US – millions to billions shares / day on NYSE India – NSE (India) – in 8th year; 25X pre-derivative levels » 4X more than Cash business Korea – KSE became KE Other “new” Hedges In India, they are working on establis
Slide 13: Why the INCREASE?
| Why the INCREASE? Crubin Futures As simple as 1, 2, 3 1. Hedging – reduce or eliminate price risk Portfolio managers, producers or sellers (e.g., farmers, oil producers), buyers 2. Ability to “go short” (e.g., food wholesalers, oil refiners) No lending or borrowing (nor systems) No upticks 3. Leve
Slide 14: Distribution of Futures and Options - FIA (Futures Industry Assoc.)
| Distribution of Futures and Options - FIA (Futures Industry Assoc.) Crubin Futures All Markets – only organized exchanges (2008) Sector % of Total (contracts) Equity Index 32.7 Individual equities 31.7 Interest rates 21.9 Agricultural 5.0 Energy 3.3 Currency 3.2 Metals 2.0 Other 0.2 Based upon mor
Slide 15: Additional functions required for establishing Futures and Options
| Additional functions required for establishing Futures and Options Crubin Futures 1 The Exchange has Regulations Rules and keen interest in developing the derivatives market and requires the support of the PAC to provide strategic guidance and My current understanding is that NSE has already dealt
Slide 16: Additional functions required for establishing Cont’d
| Additional functions required for establishing Futures and Options Cont’d Crubin Futures I can provide the following: Education and Understanding: For NSE and Depository staffs, Brokerage staff, Customers (current and potential) – Workshop (8 to 10 hours) – Understanding these financial instrument
Slide 17: Questions, Comments, Explanations
| Question and Answers Crubin Futures Questions, Comments, Explanations , Inquiries, etc.? crubinfutures@yahoo.com www.growyourstockexchange.com – endorsement
Slide 18: Thank You
Thank You Thank You Stock Exchange House 2 - 4 Customs Street P.O. Box 2457, Marina Lagos Island, Lagos, Nigeria noonyeukwu@nse.com.ng