CBN Sets $100,000 Minimum Trade for Banks on FX Platform

The Central Bank of Nigeria (CBN) has issued new guidelines for interbank foreign exchange trading through the Electronic Foreign Exchange Matching System (EFEMS), mandating a minimum trade value of $100,000.

The directive, issued on November 25, 2024, and signed by Dr. Omolara Duke, Director of the CBN’s Financial Markets Department, is part of ongoing efforts to enhance transparency, efficiency, and regulatory compliance within Nigeria’s foreign exchange market.

According to the newly released guidelines, EFEMS is designed to streamline interbank FX trading, reduce counterparty risks, and ensure adherence to CBN regulations. Bloomberg’s BMatch has been designated as the official order-matching platform for interbank transactions. Trading hours are set from 9:00 AM to 4:00 PM West Africa Time on business days.

A key feature of the new guidelines is the imposition of a $100,000 minimum trade amount, with incremental trade sizes of $50,000. The EFEMS platform will be limited to spot FX transactions involving the Nigerian naira and the United States dollar. However, the CBN may introduce additional currency pairs in the future if necessary.

The guidelines state: “All trades conducted on EFEMS are binding unless canceled by mutual agreement with written approval from the CBN. The minimum tradable amount is $100,000, with incremental clip sizes of $50,000.”

Further requirements include participants setting credit and settlement limits for other counterparties. Transactions that exceed these limits will not be executed. Participants must also set adequate credit and settlement limits with the CBN as a counterparty.

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The EFEMS platform is open only to authorized dealer banks licensed by the CBN. Other institutions wishing to participate must first obtain prior approval. Participants are required to sign agreements with the CBN-approved platform provider, maintain accurate profiles, and adhere to prescribed credit and settlement limits.

Withdrawal from the platform requires a 30-day notice and the resolution of any outstanding obligations. Additionally, trades will remain anonymous until matched, with counterparty details revealed only after the transaction is concluded in line with settlement protocols.

Transactions that exceed the set limits or fall outside EFEMS parameters must be reported within 10 minutes and logged onto the FX blotter. The CBN will closely monitor all transactions on the platform to ensure market integrity and transparency.

Participants are required to submit daily reports detailing trade volumes, settlement statuses, and counterparties. The CBN also reserves the right to publish aggregated or disaggregated trade data for market analysis, subject to confidentiality agreements.

Violations of the EFEMS guidelines or related regulations will result in strict penalties, including possible suspension or revocation of access rights. The CBN has stated that it will periodically review the platform’s operations to ensure its efficiency and compliance.

In a separate announcement, the CBN confirmed that the Bloomberg BMatch system will officially launch as the EFEMS for foreign exchange trading on December 2, 2024. All authorized dealers and banks in the interbank FX market are required to use the Bloomberg BMatch system for their trading activities. The system is designed to promote uniformity and seamless trading among market participants, while also enabling the CBN to effectively monitor market performance and manage data.

The central bank has urged banks to work closely with Bloomberg representatives to facilitate a smooth onboarding process and address any technical or operational challenges.