The Colombo Stock Exchange (CSE) in its plan to implement a Delivery Vs. Payment mechanism is considering appointing an additional settlement bank to facilitate the process at the Central Depository System (CDS).
The proposed settlement system looks to reduce the counterparty risk associated with the current system. The current system allows market participants 3 days from transaction to make settlement while they receive the shares immediately.
The Stock Exchange is implementing a system that will allow traders to take buy or sell positions on securities. Market participants will be able to speculate on equity and debt securities without having them in their portfolio. This will be done through the removal of linkages between the CDS and the trading platform.
To trade on the exchange market participants will have to post daily margin requirements. The release of funds shall be done on a request instruction by the market participant. Additional requirements will be applicable if market participants exceed thresholds set by the exchange per client.
The system aims to function on the proposed Common Payment Switch under Lanka Clear. Banks looking to participate have to have access to existing electronic transfer infrastructure.
The CDS has followed recommendations on money settlements for Central Counterparties prepared by the task force on Securities Settlements of the International Organization of Securities Commission (IOSCO) and the Bank for International Settlements (BIS).
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