Expert advises SEC on new risk prevention methods

An expert has advised the Securities and Exchange Commission (SEC) to adopt a Central Counterparty (CCP) ecosystem to manage investment risks in the capital market.

The Details: In an interview, Bernardo Mariano, the Managing Director, Equity Research Desk said this new mode of risk management has been in existence for a long time. He also pointed out that a few professionals from the Central Bank had travelled to Argentina to broaden their knowledge on this subject from renowned finance experts.

Mariano noted that the CCP would greatly boost the capital market as it does not rely on political happenings in the country.

Mariano’s words: “No matter the political party in power, the CCP is very efficient, not only for the capital market but also for the economy because it significantly reviews the systematic risk of capital market and the economy.  

“In 2008, there were many financial institutions that went bankrupt, but not a single CCP went bankrupt. This tells you a lot about how this CCP can be used to transform the capital market and attract investors.”

He advised SEC to learn from countries with developed capital markets like Argentina and Brazil to enable it handle investors the right way.

They are great places to learn from because they are old capital markets that have great infrastructure and they have gone through a lot of crises similar to what many countries in Africa are going through. 

“So, I think learning from them will help to build a more robust infrastructure and processes and to handle crisis better.”

Reacting to the development, Mr Emomotimi Agama, Deputy Director/Head, Registration, Exchanges, Market Infrastructure and Innovation Department, SEC, said the body was willing to accept the CCP ecosystem in Nigeria’s capital market. He also noted that the process was to meet international standards.

In a recent Nairametrics report, SEC advised investors to diversify their investments while transacting business in the capital market. This was to enable them reduce the risks associated with depending on just one type of asset.

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