The Colombo Stock Exchanges debt trading system is likely to take off this month, giving smalltime investors closer access to the government debt market.
Seylan Merchant Bank, who became the first of the five members to get a licence, says they plan to roll out operations this month.rn
rnThe DEX allows the public to buy and sell government debt electronically, eliminating paperwork and providing the investor with a zero risk investment.rn
rnThe system eliminates the risky job of physically transferring treasury bills and bonds.rn
rnldblquote The Bank basically acts as an intermediary between the Stock Exchange and the public, with all certificates issued by the Central Bank of Sri Lanka and the CSE acting as custodian,
dblquote SMB Director/General Manager Rohan Senanayake explained. ldblquote The license issued by the Securities and Exchange Commission (SEC) gives us authorisation as a DEX dealer.
rnExplaining the procedure to invest through the DEX system, Senanayake said individuals would be required to fill up a form to open a CDS account at the bank, after which transactions can take place.
The individual thereafter buys or sells treasury bills or bonds by just contacting the bank, and can even issue transaction instructions over the phone. rn
rnInvestors will receive a monthly statement from the Stock Exchange, which will be forwarded to them by the Bank.
Once the bonds or bills have matured, the Stock Exchange simply transfers funds to each individuals account.rn
rnldblquote Many people are not aware of the benefits of investing in government securities. People are investing in commercial banks and other institutions receiving an interest rate of approximately 5 per cent, when they could receive 7 to 7.5 per cent by investing in treasury bills or bonds,
dblquote Senanayake noted. rn
rnHe said the main attraction for investments in government debt securities is the ability to invest in a risk free instrument.
The other advantages are a government guarantee on repayment of interest and principal sum invested, higher leverage in the case of borrowings and high liquidity.rn
rnThe IT solutions and systems for the DEX are provided by the CSE and all transactions are done via a radio link.rn
-LBO Newsdesk: LBOEmail@vanguardlanka.comrn