The Lagos Commodities and Futures Exchange (LCFE) and FMDQ Clear Limited have entered into a strategic partnership to strengthen Nigeria’s commodities market infrastructure, with particular focus on clearing, settlement and risk management for petroleum liquids transactions.
The partnership, formalised through a Memorandum of Understanding (MoU) signed recently, will enable FMDQ Clear to provide third-party clearing infrastructure and related services for petroleum liquids transactions executed on LCFE’s electronic trading platform.
Under the proposed arrangement, FMDQ Clear will act as the Central Counterparty (CCP) responsible for clearing and settlement of petroleum liquids transactions, subject to the terms of the MoU and subsequent definitive agreements between both institutions.
Under the proposed framework, FMDQ Clear will provide access to established clearing technology, risk-management systems, collateral management capabilities and operational infrastructure, while LCFE retains its regulatory responsibilities for petroleum liquids clearing.
The arrangement is expected to generate operational efficiencies by allowing the commodities exchange to leverage an existing Central Counterparty infrastructure rather than independently developing a new clearing system.
Speaking on the development, Akin Akeredolu-Ale, managing director of LCFE, said the agreement aligned with the Exchange’s commitment to expanding strategic partnerships in risk management and strengthening the infrastructure required to support organised commodities trading.
He explained that the collaboration would enable LCFE to leverage FMDQ Clear’s existing clearing technology, risk-management systems and operational capabilities, significantly reducing the time, capital investment and technical resources required to establish a robust post-trade framework.
The approach, he noted, would allow the Exchange to benefit from an established institutional platform while concentrating on expanding its commodities trading operations.
According to the MoU, LCFE is licensed by the Securities and Exchange Commission (SEC) to operate an electronic trading platform for structured trading in agricultural commodities, solid minerals and metals, as well as petroleum liquids.
The Exchange already operates an electronic trading platform across its approved commodity asset classes and is seeking to activate petroleum liquids trading as an additional segment of its operations.
LCFE has also secured the applicable licences from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to undertake petroleum liquids trading and clearing-house functions.
FMDQ Clear, on its part, is registered and regulated by the SEC as a Central Counterparty, providing clearing, collateral management and settlement services to clearing members in respect of derivatives, commodities and other financial instruments in Nigeria’s capital market.
The proposed partnership therefore brings together LCFE’s commodities trading platform and petroleum liquids market focus with FMDQ Clear’s specialised clearing, collateral management and risk-control capabilities.
Emmanuel Etaderhi, senior vice president, Government Affairs Division, FMDQ Group Plc, said the MoU would reinforce cooperation between the two institutions and enable them to optimise their respective expertise and institutional capabilities.
The agreement establishes a framework for further negotiations and the execution of additional agreements and documentation required to operationalise the proposed clearing arrangement.
Among those present at the signing were Eyowan Ani, executive director, LCFE; James Daves, vice president, Clearing Risk Management Division, FMDQ; and Oluwaseun Afolabi, senior vice president, FMDQ Group, alongside other representatives of the institutions.
