The Colombo Stock Exchange (CSE) has set an end of May deadline for the announced reforms to the market. The market hopes to change to a Delivery versus Payments system for transacting which will enable new instruments to be issued to the capital markets.
The CSE hopes to further improve its mobile application offering and bring in other financial services to a unified application.The CSE has introduced a mobile application that facilitates registration and access to market information. The new application and digitization drive the CSE has taken has allowed over 12,400 people to open new accounts in the stock market which represents a more than doubling of the rate of account opening. CSE Chairman Rajeeva Bandaranaike said, “Earlier you had to travel and present a lot of physical documents. Today you can do it all digitally.” Bandaranaike was speaking on April 6 at Sri Lanka’s inaugural Internet Day held virtually. The CSE has adopted a system wherein they verify identities on a completely digital platform with the Department of Registration of Persons. Bandaranaike called on the brokerage houses, the online platform service providers, and other market participants to allow for online trading of corporate debt securities.
Over the medium term, the market will look to issue tradable instruments where the underlying asset is Gold and are in conversations with the Central Bank (CBSL) and Securities and Exchange Commission (SEC) in this regard. The legal foundation for the listing of Real Estate Investment Trusts is in place and is expected to be utilized shortly with the advent of a very low interest-rate regime. The exchange is also working on becoming a platform for the trading of repurchase agreements and other easily listed and tradable securities.
The market will also look to allow for stock borrowing and lending which will facilitate market participants to bet and profit on a downward trend of a security. Bandaranaike acknowledged that the market and regulator were overly paternalistic and this had prevented many companies from listing on the exchange. Bandaranaike admitted that many technologies and internet start-ups would not be able to list given the regulatory set up that existed before. The regulator and exchange are going to do away with unnecessary impediments to listing shortly and let investors take calculated risks. Bandaranaike hailed the successful Rs 3.2 billion IPO of Windforce. Chrissworld an SME, has recently been approved for listing. The Ceylon Electricity Board is issuing debt securities to the market which will shortly be listed and traded on the secondary market.
The CSE will continue to work towards the unification of the stock exchange with the government securities market for which they have already communicated their willingness to the Central Bank. Over the medium term, the CSE will phase out all physical documentation. Applications for IPOs, rights issuances, share buybacks, and other functions of the CDS will all be interfaced digitally. The stock exchange is to become paperless in the near future.
