The Colombo Stock Exchange on Wednesday sent out calls to admit trading members to trade on its new debt trading system, the DEX.
Trading members are second tier brokers, with access limited to dealing in corporate debt and government securities.rn
rnProspective members need a minimum Rs. 25 mn capital and the capacity to develop clientele for debt securities.rn
rnFor a Rs. 1 mn licence fee, the DEX offers scripless trading, Delivery versus Payment (DVP) settlement, exposure based risk management, multiple settlement cycles, facilities for REPO & Reverse REPO transactions, online market information and post trade transaction information. rn
rnThe Rs. 50 mn system, which starts off in June, also supports the use of Internet based trading technology. rn
rnMarket players have the option of participating as a debt dealer or a debt broker to service both retail and institutional investors.rn
rnHowever, transaction and the licence fee will be waived for the first six months, CSE Director General, Hiran Mendis told Lanka Business Online.rn
rnldblquote Transaction fees are flexible. Trading members can opt for fixed or floating brokerage depending on what they want, dblquote explains Mendis.rn
rnThe DEX so far, has attracted good response. Most of the 15 stockbroking firms and parent companies of primary dealers are expected to go for a licence.rn
rnBut moves to link the DEX to the Central Banks depository system, to offer corporate debt and government securities on a common platform at market determined interest rates have not taken off.rn
rnA primary dealer licence ensures the DEX gets a smooth supply of government securities from the primary market at competitive prices. There is a possibility that the DEX will not be as competitive, when government debt is accessed through the secondary market.rn
rnBut CSEs application for a primary dealer licence, has not found favour with the Central Bank. The bank says the Exchange should not fully own the subsidiary, but get stockbrokers to contribute to its capital.rn
rnHowever, Central Bank has issued licences to 100 percent owned subsidiaries of the other companies and banks to operate as primary dealers.rn
rnThe Exchange is now suggesting an alternative route, similar to one that is happening in India. rn
rnThe Reserve Bank of India (RBI) allows brokers of the National Stock Exchange (NSE) to access the primary market directly. Government debt is also retailed through the NSE.rn
rnldblquote We are asking the government and the Central Bank to look at a similar option, so that the Exchange does not have to get a primary dealer licence, dblquote Mendis said.rn
rnFrom a capital market development point, the CSEs initiative would pave the way for universal brokers. In India, universal brokers offer stockbroking, corporate debt and government securities on a common platform at market determined interest rates.rn