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CSE withdraws circulars convinced of “practical challenges” faced by brokers

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9 March 2021 09:20 am - 0     - {{hitsCtrl.values.hits}}

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The Colombo Stock Exchange (CSE) yesterday retracted two circulars issued in January and February, which asked the stockbrokers to furnish their credit information on a weekly basis, changing from the usual practice of furnishing such information every fortnight. 


Majority of stockbrokers and investors blamed those two circulars for the downturn in the market, which they claimed killed the positive market sentiment after the Colombo Stock Exchange’s (CSE) benchmark index, All Share Price Index (ASPI), became the best-performing stock index in the world in the latter part of 2020 and early part of 2021.


A group of influential investors in the latter part of last week met with Capital Market Minister Ajith Nivard Cabraal for a “wide-ranging discussion”, where broker credit, forced selling and margin facilities were extensively discussed. 


The investors had appealed to the State Minister to intervene to deal with the broker credit issue in a sustainable manner, without creating a panic situation, which has led to forced selling.
The CSE in a brief statement yesterday said it had been in discussions with the stockbroking community with regards to the concerns they expressed pertaining to the “practical challenges” in complying with the regulatory measures on monitoring credit exposure undertaken by stockbrokers/dealers. 


“Following the discussions held today (March 8) between the stockbroking community, Colombo Stock Exchange and Securities and Exchange Commission (SEC) of Sri Lanka, it was decided to withdraw the requirements applied on the stockbroker firms via the latest circulars bearing number 04-03-2021, dated March 8, 2021, due to the system limitations and practical constraints regarding the submission of certain information,” the CSE said.


However, it appears that the stockbroking firms are still bound by the requirement to provide their credit information to the CSE on a fortnightly basis. It would be interesting to find out what are the “practical challenges”, which prevent the stockbrokers from providing such information on a weekly basis and that got the CSE and SEC convinced to withdraw the two circulars. 


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