SEC gets six responses for derivatives exchange
The Securities and Exchange Commission (SEC) has received six expressions of interest (EoIs) to set up and operate a multi-asset class derivatives exchange but has extended the timeline for submission as there is more demand, high-level top sources said.
They said many had requested more time to submit their proposals; hence the regulator had extended the timeline for submission to August 28. The SEC was able to call for EoIs for this exchange after the new Act enabled them to licence and regulate derivatives exchange for futures and options trade. A multi-asset class is an investment approach that combines asset classes, such as cash, equities, or fixed income. The most common underlying assets for derivatives are stocks, bonds, commodities, currencies, interest rates, and market indexes.
The criteria specified by the SEC for an entity currently operating such a derivatives exchange should partner itself with the Sri Lankan entity for submitting an EoI. Shortlisted applicants will be invited to demonstrate their business and technical capabilities to operate the exchange.
Sources said that Sri Lanka is rich in many commodities such as gems and jewellery, sugar, coffee, spices, tea, rubber, etc. The officials pointed out that the Sri Lankan traders dealing in such commodities, in the Pettah bazaar are pretty much glued to such exchanges in London. They expressed confidence that this exchange will be taken on by these traders when it is established.
“With such an exchange, the local farmers will get a guaranteed price, unlike now. They will get their futures and options exercised and their post-harvest agriculture loss will be considerably reduced. Sri Lanka is strategically located as a trading hub for both physical and futures trade. The strategic position of the country provides ideal opportunities for offshore, nearshore and onshore trade-offs in multi-asset classes within the regulatory framework. The derivatives trading in the country from a risk management and price discovery perspective, is important at this juncture,” a source said.
He added the preferred location for this exchange will be the port city. “We can also establish an exchange inside Colombo, but the port city will be the preferred location,” he added.
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