The Colombo Stock Exchange on Wednesday admitted five new members to trade on its upcoming debt securities board, the DEX.
The trading members are: Capital Alliance Holdings Ltd., Central Finance Co. Ltd., National Wealth Corp. Ltd., Sampath Bank Ltd and Seylan Merchant Bank Ltd.rn
rnTrading members are second tier brokers, with access limited to dealing in corporate debt and government securities. As an introductory offer the CSE is waiving the Rs. 1 mn-joining fee, to encourage more participation.rn
rnTrading members also have to put up the necessary hardware, which costs around Rs. 1 mn, at their own expense. rn
rnProspective trading members need a minimum Rs. 25 mn capital and the capacity to develop clientele for debt securities. rn
rnFor a Rs. 1 mn licence fee, the DEX offers scripless trading, Delivery versus Payment (DVP) settlement, exposure based risk management, multiple settlement cycles, facilities for REPO & Reverse REPO transactions, online market information and post trade transaction information. rn
rnThe Rs. 50 mn system also supports the use of Internet based trading technology. rn
rnMarket players have the option of participating as a debt dealer or a debt broker to service both retail and institutional investorsrn
rnThe CSE says trading membership has been given to these institutions, subject to the Securities & Exchange Commissions (SEC) licensing requirements.rn
rnSEC approval is needed to start trading and dealing in debt securities.rn
rnThe CSE is expected to go ahead and launch the DEX later this year, with or without access to the primary market for government debt.rn
rnThe exchange, which has been doing mock runs on the DEX, says a new proposal to sort out an impasse with the Central Bank is still being discussed. rn
rnThe CSE was asking the Central Bank to give access to 5 percent of the primary government securities market.rn
rnIf approved, the move would amount to CSE accessing the primary government securities market without being appointed a primary dealer. rn
rnThe CSEs route is similar to that of a service provider. Debt brokers can make their bids through the CSE, who will in turn bid at the weekly primary auctions. rn
rnExchange officials say that access to the primary market is important to for individual investors to get a good yield. rn
rnldblquote We believe that the debt trading system will encourage an average person to have access to government securities. Because the debt trading system can be supported by through the Internet and it can be accessed by the branches of the exchange, dblquote says Hiran Mendis, CSEs Director General in an earlier interview. rn
rnThe availability of government debt as an instrument will also enable brokers to offer a wider selection of services to clients, taking them a step closer to becoming universal brokers. rn
rnldblquote DEX has been extensively tested by the exchange. The members of the SEC will be able to trade equity and debt instruments. It is a move in the correct direction, dblquote adds Mendis.rnrn