CSE launches CCP system, paving the way for derivatives market

Pix by Pradeep Pathirana 

The Colombo Stock Exchange (CSE) has taken a monumental step towards the introduction of a derivatives market by launching a Central Counterparty (CCP) system. 

This critical infrastructure is designed to significantly reduce systemic risk and enhance market integrity, establishing the foundational framework necessary for new asset classes such as futures and options.

The launch of the CCP is the culmination of a multi-year effort to modernie Sri Lanka’s capital market infrastructure. By acting as the counterparty to all buyers and sellers, the new system guarantees the settlement of all equity transactions, a prerequisite for a functioning derivatives market.

Arjuna Herath, Chairman of CSE Clear (Pvt) Ltd., the entity operating the CCP, directly linked the launch to the exchange’s future ambitions. 

“With the launch of the CCP, we are now preparing to introduce derivatives and have already applied for a license from the SEC,” he said.  Herath highlighted the progressive enhancements that led to this moment, including the implementation of Delivery vs. Payment (DVP), Stock Borrowing and Lending, and regulated short selling.

To commemorate this milestone achievement, a special Market Opening Ceremony was held on 1st August 2025 at the iconic CSE trading floor.

This strategic direction was reinforced by the CSE’s Chairman Dimuthu Abeysekera.

“The implementation of a CCP marks a defining moment in our journey to elevate Sri Lanka’s capital market infrastructure to globally recognised standards,” he remarked. “It enhances market integrity, reduces systemic risk, and sets the stage for the introduction of new asset classes such as derivatives and futures. Establishing the right infrastructure is a prerequisite for meaningful market development.”

The new framework is expected to attract greater institutional and foreign investment by creating a safer, more efficient post-trade environment aligned with international best practices. Prof. H. Dissabandara, Chairman of the Securities and Exchange Commission of Sri Lanka (SEC), noted that the infrastructure was designed in alignment with the Principles for Financial Market Infrastructure set by the International Organization of Securities.