CSE to replace Central Depository System
The Colombo Stock Exchange (CSE) will replace its Central Depository System (CDS) after nearly two decades, officials said.
“After 18 years we’ll be replacing the CDS and introducing the new system in June,” Rajeeva Bandaranaike, the new CSE CEO told the Business Times. He said the new CDS will encompass better support from the vender, Millennium IT. “The new CDS will have better features enabling us to give a better service to its customers,” he said.
Rajeeva Bandaranaike
The new CDS will also have enhancements to enable the Repo Facility on corporate debt in a bid to encourage and entice trading of debentures on the secondary market. Last year saw the CSE handle a record number of debentures at a total worth of Rs. 65 billion, but they were hardly traded. Mr. Bandaranaike added that the CSE, in an attempt to popularize debentures, plans to cut the transaction cost. “We’re trying to introduce a cap. Also now primary dealers can trade in debentures.”
He added that the Central Counterparty (CCP) which is between counterparties to financial contracts traded in one or more markets (becoming the buyer to every seller and the seller to every buyer) is now being fast tracked in a bid to demutualise (the process through which a member-owned company becomes shareholder-owned) the CSE.
“A CCP has the potential to reduce significantly risks to market participants by imposing more robust risk controls on all participants and to enhance the liquidity of the markets it serves, because it tends to reduce risks to participants and, in many cases, because it facilitates anonymous trading.”
He said that the CSE is discussing a request by several brokers requesting temporary deactivation of their operations. Some 29 stock brokers operate in the CSE and the industry says that this number is too high for all to sustain their businesses in such a small market, but according to Mr. Bandaranaike the issue really lies with low turnover levels in the CSE.
“We need to look at it in the perspective of larger market capitalisation, more firms in the CSE, what new products to introduce and broadening the depth and breadth of the market,” he said.
He added that the moment the CCP and a clearing house are incorporated, the CSE will introduce stock borrowing and lending and derivative products such as an index future.