CSE launches RSS and SBL
View(s):The CSE (Colombo Stock Exchange) has introduced RSS (Regulated Short Selling) through SBL (Stock Borrowing and Lending),
All investors who hold CDS (Central Depository System) accounts can now do SBL transactions as lenders and borrowers via the CDS through their corresponding trading participants and custodian banks (CDS participants), officials said.
SBL connects the two parties for a set period, letting them capitalise on market trends as in prevailing interest rates.
A short seller will first have to borrow stocks through a SBL agreement.
Only the CSE-authorised securities will be allowed for SBL transactions, and the eligibility of these securities will be reviewed by the CSE quarterly.
RSS is only permitted through the Automated Trading System (ATS), using the services of a trading participant, and will not be allowed for orders through the Internet. RSS is only for shares of specific listed companies meeting liquidity criteria.
When the price of a share eligible for RSS drops by 10 per cent from its previous closing price, the Uptick Rule will come into effect. If it reduces by 20 per cent, short selling of that share will not be allowed until the price appreciates above the indicated threshold.
Under the Uptick Rule, which minimises potential market manipulation and volatility, a short sell order must be at least one tick size above the last traded price of the share.
Shareholders who don’t trade regularly can earn a fee by lending them to a short seller.
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