CSE to introduce derivatives to enhance performance
The Colombo Stock Exchange (CSE) will build the capacity and
infrastructure to introduce derivatives to the capital market to enhance
performance among local and foreign investors, its President Nihal
“Before introducing derivatives to the market, we want to have all
requirements in place such as legal framework, training and education to
successfully implement it,’ Fonseka told the Daily News Business.
Fonseka is currently in India on a study tour with his Indian
counterparts to explore the possibility of introducing derivatives to
the Sri Lankan market shortly.
He said that India is reckoned as one of the most established markets
in the world for the exchange of trade derivative products.
Fonseka said that once they introduce derivatives to the market it
will take a little time for people to familiarise themselves on this
mechanism as in India it took several years to popularise this financial
instrument among investors.
Under this concept it has mini derivative contracts that would enable
small investors with a small exposure in the cash market to hedge their
positions like Sri Lanka’s hedging of petroleum will also help investors
to understand the near term computation of volatility in the stock
He also said that India is doing well with the introduction of this
system. Therefore, we also could expect a positive impact on stock
market trading from the medium to the long term perspective with the
uncertain market conditions.
The introduction of exchange traded derivatives on a Clearing
Corporation like India will help build the confidence among local and
This is also part and parcel of this system, he said. A group from
the CSE will be sent to Mumbai for a training session to study the
operational aspects, he said.