Oscar Onyema, the chief executive officer of the Nigerian Stock Exchange (NSE) Wednesday encouraged exchange traded products (ETPs) issuers to expand their footprints by entering new markets and leveraging technology and data analysis.
He also urged them to introduce other asset classes and broaden their distribution channels.
Onyema who gave the opening remarks at the 2018 ETP conference held in Lagos on Wednesday December 5, 2018 said the introduction of ETPs is one of the Exchange’s strategies to enhance diversification as well as broaden the options available in the capital market to support the efficient implementation of investment strategies across diverse asset classes and instruments.
ETPs are known as open-ended investments listed on the exchange and traded and settled like shares. They are passive investments aiming to replicate the performance of a given market, generally by tracking an underlying benchmark index.
According to Onyema, ETPs are one of the most significant financial innovations in recent decades and have shaped the financial markets.
“Since the introduction of ETPs in 1993, they have gained widespread acceptance in most developed markets. Over the last 15 years, investors’ demand for ETPs (both retail and institutional) has grown remarkably, which in turn has led to a greater variety of products offered by ETP sponsors,” he said.
Onyema added that globally, ETPs have grown by recording net flows of approximately $358 billion as at October 2018.
Reeling statistics from ETFGI, Onyema noted that the Global ETP industry had close to 15,000 ETPs listings on 71 exchanges with assets of about $5 trillion cutting across 392 providers at the end of October 2018.
He said the equity-based ETPs make up 76.7 percent of global ETP listings whilst fixed income based ETPs represent 16.7 percent of listings, similar to the asset split in Nigeria.
Nigeria’s ETP market opened with the cross-listing of ABSA’s Newgold ETF on the Nigerian Stock Exchange in December 2011. Since then, the ETPs space has grown steadily by a cumulative average growth rate of 8 percent over the last 4 years, said Onyema.
As at date there are 9 ETPs listed on the Exchange. They comprise of 2 thematic exchange traded funds (ETFs) providing access to Pension-compliant and Shariah-compliant stocks, 2 broad equity market ETFs tracking the NSE 30 Index, 3 sector based ETFs, 1 commodity ETF, and 1 bond ETF tracking exposure to benchmark FGN Sovereign Bonds.
To further diversify the ETP space, the NSE boss disclosed that the Exchange is supporting new product development in collaboration with issuers and thus expect the launch of new ETPs in the short term.