To minimize risks, guarantee settlement of funds:
CSE mulls setting up Clearing Corp
The Colombo Stock Exchange (CSE) is exploring the possibility of
setting up a Clearing Corporation (CC) to minimise risks and guarantee
settlement of funds in all stock market transactions shortly, a
spokesman for the CSE said.
The CSE’s objective to initiate the Clearing Corporation is similar
to the Indian model, which will minimize risk and increase the number of
volumes in the market, said CSE Manager Business Development Thushara
He said initial discussions were held with all stock brokering firms
to enlighten them on the new initiative with Indian assistance.
Therefore, they are now exploring the possibility to set up the Clearing
The CC, a financial intermediary, which interfaces with investors to
buy or sell securities on behalf of them, charges a percentage of the
settlement amount for doing so.
Brokerage firms can also buy/sell securities for their own firms.
This would also be a stepping stone to introduce derivatives and stock
futures to the market in the near future, sources said
Head of Sales and Marketing Lanka Securities (Pvt) Limited, Eardley
Kern said that a trading member is a firm, which is a member of the CSE
authorized to place orders in the capital market system.
The brokerage house gives confidence to a trading member, which
safeguards the industry in the event of default clients in the stock
market, he said
A clearing member is a firm, which is a member of an exchange
Clearing corporation, and is involved in clearing trades. Most of the
brokerage houses are clearing members.
If a brokerage firm does not have the authority to clear the trades
they have to register their trades with a clearing member to settle
At present the CSE has 21 registered brokering firms, he said.
All retail investors should open an account with a brokerage firm to
buy/sell securities. It accepts orders from investors who are registered
with the firm, validates the orders (with the help of their own
software) and routes them to the exchange.
Director/Chief Executive Officer Asha Phillip Securities Limited,
Dimuthu Abeyesekera said that this quick method will complete the
transaction on the same day and will help introduce various instruments
including derivatives and stock futures to the market.