The Central Bank of Nigeria (CBN) has introduced a significant change to foreign exchange trading by pegging the minimum tradable amount at $100,000 on the newly adopted Electronic Foreign Exchange Matching System (EFEMS). Incremental trade sizes have also been set at $50,000, with strict guidelines on credit and settlement limits.
Key Highlights of the New Guidelines:
Minimum and Incremental Trade Sizes:
- The minimum trade amount is set at $100,000.
- Trades can only increase in increments of $50,000.
Credit and Settlement Limits:
- Participants must establish credit and settlement limits for their counterparties.
- Transactions exceeding these limits will be blocked from execution.
Platform Deployment:
- All authorized dealers must start using the Bloomberg BMatch platform as EFEMS for forex trading by December 2, 2024.
- The platform is expected to enhance transparency, operational efficiency, and price discovery in the forex market.
Regulatory Oversight:
- The CBN emphasized that the use of Bloomberg BMatch would allow better monitoring of market activities and performance, ensuring greater accountability.
CBN’s Statement:
In a circular signed by Dr. Omolara Duke, Director of the Financial Markets Department, the CBN outlined its commitment to improving market integrity:
“The Bloomberg BMatch platform will enhance the integrity and operational efficiency of the FX market by providing transparent and automated matching of trades.”
Implications for Banks and Market Participants:
Banks must quickly adapt to the new platform, ensuring they comply with the directive. The move aims to create a more efficient and fair trading environment by automating processes and reducing manual intervention.
Market participants, including banks and traders, will need to familiarize themselves with the platform’s features, particularly the credit and settlement limit settings, to avoid transaction rejections.
This change is part of broader efforts by the CBN to stabilize the forex market and promote a more efficient pricing mechanism. The success of this initiative will depend on how well banks and other participants integrate the Bloomberg BMatch system into their operations.
