The Central Bank of Nigeria (CBN) has introduced contemporary tips for interbank international change (FX) buying and selling through its Digital International Change Matching System (EFEMS), efficient from November 25, 2024.
The brand new directive, signed by Dr. Omolara Duke, Director of the Monetary Markets Division, mandates a minimal commerce worth of $100,000 for all interbank FX transactions.
This transfer is aimed toward enhancing market transparency, making certain environment friendly buying and selling, and strengthening compliance inside Nigeria’s FX market.
EFEMS goals to streamline buying and selling and cut back dangers
The newly issued tips are designed to streamline interbank FX buying and selling and cut back counterparty dangers. By utilizing EFEMS, the CBN goals to create a extra clear and orderly FX market whereas adhering to its regulatory framework.
The CBN has designated Bloomberg’s BMatch because the official order-matching platform for these transactions, with buying and selling hours set between 9:00 AM and 4:00 PM West Africa Time (WAT) on enterprise days.
A key provision within the tips is the institution of a $100,000 minimal tradable quantity per transaction. Moreover, the CBN has set incremental clip sizes of $50,000, which contributors should adhere to. The EFEMS platform will likely be restricted to identify FX transactions involving the Nigerian naira (NGN) and america greenback (USD), though the CBN reserves the suitable to introduce different forex pairs sooner or later if deemed crucial.
The rules doc learn, “All trades consummated on EFEMS are binding until canceled by mutual settlement of each events with written approval from the CBN.
“The minimal tradable quantity is US$100,000.00, with incremental clip sizes of US$50,000.00.
“Members should set credit score and settlement limits for different counterparties within the system. Transactions exceeding these limits won’t be executed.
“Members will need to have satisfactory credit score and settlement limits set for the CBN as its counterparty bank.
“Members are required to adjust to the Nigerian International Change Code and different CBN rules.”
Key options of the EFEMS tips
The rules define a number of essential operational protocols for contributors:
- Binding Trades: All trades executed on EFEMS are binding until mutually canceled by each events with written approval from the CBN.
- Credit score and Settlement Limits: Members are required to set credit score and settlement limits for counterparties throughout the system. Transactions that exceed these limits won’t be executed. Comparable limits should even be set for the CBN as a counterparty bank.
- Compliance with CBN Laws: All contributors should adhere to the Nigerian International Change Code and different related CBN rules.
- Anonymity and Reporting: Trades carried out through EFEMS will stay nameless till matched, with counterparty particulars revealed solely after transactions are accomplished in accordance with settlement protocols. Moreover, any transactions exceeding set limits or carried out exterior the prescribed parameters have to be promptly reported and logged on the FX blotter inside 10 minutes.
Participation standards and platform Entry
Participation within the EFEMS is restricted to licensed seller banks which are licensed by the CBN. Different monetary establishments concerned with becoming a member of the platform should get hold of prior approval from the CBN.
All contributors are required to execute agreements with the CBN-approved platform supplier, preserve correct profiles, and function inside prescribed credit score and settlement limits. Ought to a participant want to withdraw from the platform, they need to present a 30-day discover and resolve any excellent obligations earlier than exiting.
Monitoring and penalties for non-compliance
The CBN has emphasised that it’ll intently monitor all trades carried out on EFEMS to make sure market integrity and transparency. Members are obligated to submit every day experiences detailing commerce volumes, settlement statuses, and counterparties. Any violation of the EFEMS tips or associated rules will result in strict penalties, together with the suspension or revocation of entry rights to the platform.
The CBN additionally reserves the suitable to publish aggregated or disaggregated commerce information for market evaluation, topic to confidentiality agreements.
Bloomberg BMatch to go reside on December 2, 2024
- In a associated growth, the CBN introduced that the Bloomberg BMatch system will formally go reside because the EFEMS for international change buying and selling on December 2, 2024.
- The system goals to facilitate seamless and uniform buying and selling amongst market contributors, whereas additionally enabling the CBN to effectively monitor market efficiency and handle information.
- The central bank has urged all licensed sellers and banks to liaise with Bloomberg representatives to expedite the onboarding course of and tackle any technical or operational points promptly.
- This transfer is anticipated to considerably enhance the FX market’s operational effectivity and transparency, whereas additional enhancing the CBN’s oversight capabilities.
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