SEC improves CSE structure

by Lalin FERNANDOPULLE

Investors hailed the move by the Securities and Exchange Commission (SEC), to enhance the effectiveness of the microstructure of the Colombo Stock Exchange (CSE) to lure more investors to a vibrant stock market.

They said, the structural changes will benefit local and foreign investors who have built confidence in investing in Sri Lanka. Outgoing Director General SEC, Channa De Silva said the excessive brokerage and transactions costs increase the financial burden of investors and reduces the appetite to trade intensely in the market. The reduction in the transactions less than Rs. 1 million is 28 percent and those over Rs. 1 million is 16 percent. De Silva said the SEC delayed to reduce the transaction cost because the volume of the stock market was low. The market volume has increased significantly following the stable environment in the country. In the height of the war the market turnover was less than Rs. 15 million.

The current average daily turnover is in excess of Rs. 1.5 billion. The crossing threshold has been increased from Rs. 10 million to Rs. 20 million. The tick size on transactions has been slashed to 10 cents across the board.

The threshold for negotiable brokerage has been reduced from Rs.100 million to Rs.50 million. The minimum brokerage floor will be 0.15 percent.

De Silva said the reduction in cost structure was essential to make the Sri Lankan market competitive as high cost structures erode the confidence of investors on market conduct and governance. “The structural reforms are vital as high transaction cost reflects inefficient market structures and sends wrong signals to foreign fund managers with regard to market sophistication and conduct”, De Silva said.The SEC, CSE and CDS fees and government levy will be the same in accordance with negotiable trade.