SEC promotes day trading - cuts transaction costs
Important mechanism to provide liquidity:
The Securities and Exchange Commission of Sri Lanka (SEC) is in the
process of reducing transaction costs by 30 per cent for day trading
activities in the Colombo Stock Exchange (CSE).
At present, day trading transactions account for approximately 5 per
cent of the total daily turnover in the market.
Therefore, with the reduction in brokering charges/transaction costs
it could double trading activities in the long run, Director General SEC
Channa de Silva told Daily News Business.
He said Sri Lanka’s transaction costs are possibly the highest in the
world and brokering fees or transaction costs especially for day trading
should be brought down.
The purpose of this move is to reduce the transaction costs and also
create a culture for day trading activities in the market. This is also
an important mechanism to provide liquidity to the market, de Silva
At present brokering charges for both buying and selling are more
than 2.8 per cent and brokering charges have now been removed for
selling day trading transactions.
If 30 per cent is reduced on buying for day trading, which is around
1.4 per cent trading volumes could be doubled in the market, he said
He said that 75 per cent of retail trading comes from day trading
business in India, which enabled to create a vibrant and strong market.
In view of this Indian scenario, the CSE and SEC are looking at
possibilities to bring down the fee or cost accordingly.
Having a vibrant day trading market in the CSE will reduce the
pressure for investors who want to exit from the market and it will
reduce the impact cost to a great extent, he said.
The Director General said that initially they will introduce this
concept for six months to review the possibility of this move and will
implement it based on the performance in the market.
It is believed that reducing transaction costs is a vital component,
which creates market efficiency, he said. So far no decision has been
taken on this aspect.
However, stockbrokers say it is not timely to introduce this new
concept when the market’s daily turnover is at a low ebb and this will
affect brokering houses in the country.
They also said that a reduction of the brokering fee will not have a
positive impact during a time of recession.