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FMDQ OTC Securities Exchange Plc has announced its readiness to commence listing of Short-Term Bonds , STBs, in the Nigerian fixed income market following regulatory approval from the Securities and Exchange Commission, SEC. The Commission also approved the FMDQ Short-Term Bonds Registration Process and Listing Rules, which were developed in furtherance of its commitment to provide effective market regulation and governance for the markets under its purview.
FMDQ said in a statement that the decision to introduce STBs in the market was a result of the funding gap for corporates between the money market debt instruments such as commercial papers with maximum tenors of 270 days and the traditional medium- to long-term debt instruments (e.g. bonds) which are typically issued for three years and above. STBs are essentially short-term debt instruments issued by corporate entities for tenors of between one year and not exceeding three years. In addition to bridging the funding gap between short and medium to long-term debt instruments, STBs are designed to serve the liquidity needs of the medium to large creditworthy corporates and commercial entities by providing an alternative/competitive source of financing to bank loans.
Also, STBs are beneficial to the debt capital market as they will serve to boost the investment product bouquet for the buy-side, which comprises amongst others, the Pension Fund Administrators, PFAs, offshore investors and other market participants. According to the Exchange, the STB rules serve as a guide to issuers, STB sponsors and the investing public, amongst others. The rules outline the governance structure for STB issuance as well as the procedure for the registration of prospective STBs, FMDQ said, adding, “As a consequence of SEC’s approval of the STB Rules, FMDQ will serve as the Exchange through which the primary due diligence for all STB issuance, consequently ensuring an expedited time to market, shall be conducted and also provide its efficient platform for the registration and listing of all STBs”.