Sri Lanka listed debt holders may get trading facilities soon

Nov 21, 2012 (LBO) - Sri Lanka's listed debt holders will get better facilities to trade and exit their investments with a new trading system officials said with the possibility of restrictive margin requirement which had all but killed transactions, being relaxed. Though they deal billions of rupees worth of stocks without margin, the requirement for margins in a market that does not yet exist had led to its premature death, dealers who have knowledge about debt trading say.
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Though some people who bought debt are now without an exit mechanism, market participants say many hold them to maturity.

To make market on debt, a dedicated licensed stockbroker is needed.
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It is not clear why a licensed stock broker and not an experienced debt dealer is needed.

Market participants say the stock exchange should look at allowing smaller trades, perhaps below 50 million rupees to be traded without up front margins.

Wijayawardhane said the possibility of making margins more flexible will be looked at.
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Colombo Stock Exchange director general, Surekha Sellahewa told reporters, that a new version of an automated trading system that may be up within the next two months will have facilities to trade debt.

Sri Lanka had lifted a 10 percent withholding tax on corporate from January 2013, which is expected to result in a series of new debt listings.

At the moment a separate software is needed to trade on the 'DEX' platform of the Stock Exchange for which several brokers have stopped paying subscriptions fee as trading died down over the past few years.

Stock Exchange officials were not aware of how many brokers had active debt systems. There was at least one specialised debt broker.

Some of the newer brokers do not have the facility and several who had the facility had also stopped renewing their subscriptions.

A part of the problem is due to up front margin requirements needed to trade debt.

Assistant General Manager, Regulatory Affairs at the Colombo Stock Exchange Renuke Wijayawardhane said the possibility of placing post trade margins is now being examined.

Brokers who want to deal on their own account and provide two way quotes also have strict requirements which they say had deterred them from providing liquidity, with at least one who had the facility later stopping due to what they said were cumbersome requirements.