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CSE implements new OTC Platform to conduct REPO Transactions on Debt Securities

The Colombo Stock Exchange (CSE) announces the introduction of a new Over the Counter (OTC) Platform to facilitate the Repurchase (REPO) Transactions on Corporate Debt Securities with effect from today (16th September 2021).

The new OTC Platform is a significant step in the product expansion line-up of the CSE and is projected towards establishing a vibrant REPO market for Debt Securities listed on the CSE.

Considering the large volumes of fixed income securities actively traded by market participants outside the CSE’s platforms, the CSE observed the opportunity to play a role as a facilitator in connecting securities providers with collateral who need to finance their liquidity requirements with cash providers.

Implementation of this mechanism is fronted with the objective of enabling market participants to carry out REPO transactions utilizing the facilities offered by the CSE as an intermediary at a reasonable fee and improving the liquidity of the listed corporate debt market at the CSE. The OTC Platform would be an addition to the trading of corporate debt securities on the ATS. The mechanism will also contribute towards creating a new opportunity for investors, trading members, and other corporates involved in the fixed income securities market in Sri Lanka.

The CSE focuses on several advantages of the newly introduced OTC Platform. The transaction details provided by both trading parties will be matched by the CSE when the REPO transaction is reported. Therefore, the parties can ensure that the transaction is executed with the exact pre-agreed terms, unlike matching it through an automated trading environment. In addition, collateral replacement and rollover REPO transactions are also facilitated on the OTC Platform, which are not available in the ATS.

The OTC Platform can be utilized by market participants only for REPO transactions on corporate debt securities. Initially, REPO transactions would be permitted only on listed corporate debt securities through the OTC Platform. Any investor who is an "Eligible Investor", as defined in the Rules governing the OTC Platform, can trade on the OTC Platform.

The new OTC Platform has been implemented based on the consultations that CSE had with stakeholders and experts in the fixed income market in order to make the platform feasible.

The amendments to the Trading Rules and the CDS Rules have been approved by the Securities & Exchange Commission of Sri Lanka (SEC).

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