Into Africa: Building a sub-Saharan OTC market

Nigeria opened up a local over-the-counter derivatives market last year – a big step for the sub-Saharan region. Dealers and hedgers are now hoping for growth across the region, but some big gaps need to be filled. By Michael Watt

"The biggest fear in the sub-Saharan derivatives market is fear of the unknown,” says Roy Daniels, head of Africa trading at Rand Merchant Bank in Johannesburg – and the unknowns come thick and fast. Basic market fundamentals such as benchmark funding rates and stock exchanges are absent or weak, counterparty risk is difficult to manage, and there is scarcely a paddling pool’s worth of liquidity in many asset classes.

Despite this, South African traders are looking eagerly at the region