Central Bank went online with scripless security settlement system earlier last week as rate uncertainty kept primary dealers away from the secondary market.
The new system is integrated with the Real Time Gross Settlement (RTGS) system for settling primary dealer accounts.
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rnCentral Bank will provide a special seat for the Colombo Stock Exchange (CSE) on the system so that secondary trading can take place through their brokers as well the 12 primary dealers who automatically have access to the system.rn
rnBut dealers in government securities said the move is unlikely to spur secondary market activity immediately since rates have moved up sharply over the last few months.rn
rnThe Colombo Stock Exchange will also not have direct access to the primary bill and bond auctions.rn
rn"They will not be allowed to compete with the Primary Dealers when it comes to the primary issues as they are not Primary Dealers, dblquote said Ranee Jayamaha, Assistant to the Governor, Central Bank.rn
rnldblquote Secondly their CDS should increase its capacity to at least Rs. 100 mn, to qualify to get this seat.
Subject to the conditions the Monetary Board has given approval for the stock Exchange to get the seat.
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rnldblquote Government security yield is treated as the bench mark for much longer term private equities and when it is listed the capital market would know what is the reference rate to look for and accordingly they can price the long term private equities, dblquote she said.rn
rnThe stock exchange will also need a lquote SWIFT connection to send payment instructions to the Central Bank that happen through its debt trading board DEX.rn
rnWith government securities being traded through the DEX, it will also help improve access and price transparency providing a more accurate yield curve for benchmark corporate bond issues.rn
rnBond rates have gone up by over one percent since the presidents take over of three key ministries.rn
rnPrimary dealers said that some trading took place in longer-term government bonds this week compared to the last few weeks but secondary market activity still remained a fraction of pre 4th of November levels.rn
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-LBR Newsdesk: LBOEmail@vanguardlanka.comrn