Sri Lanka’s SEC has approved rules to enable electronic account opening, trading and settlement at the Colombo Stock Exchange.
Sri Lanka’s SEC (Securities and Exchange Commission) has approved amendments to the rules for stockbrokers, central depository accounts (CDS) and public listings, as part of a digitalisation initiative to ensure electronic clearing and settlement capabilities at the CSE (Colombo Stock Exchange).
Initiated by an SEC-CSE joint committee, the rules will allow the stock market to transition from a paper-based to electronic environment, allowing investors to open CDS accounts, start trading and make settlements online – thereby eliminating visits to stockbrokers.
The initiative is aimed in part at ensuring the stock market can function smoothly in the event that a future lockdown risks another closure of the market, similar to the seven-week closure recently ended on 15 May.
Currently, internet-based trading through stock brokers, account creation and maintenance at the CDS, and fund settlement between stock broker firms and banks are already electronic.
However, account opening process with stockbrokers is still largely paper-based, and the post-trade settlement process for local retail investors is still largely cheque-based. These will be converted to an electronic format bringing “significant operating efficiencies to the system and improving the client experience and convenience,” the SEC said in a statement on 2 June.
Since 2017, stock accounts have been opened with bank accounts details, mobile numbers and email addresses, according to CSE chief Rajeeva Bandaranaike. The next step is to collect these details for an estimated 600,000 CDS accounts as part of the transition.
Bandaranaike hopes this can be completed within a month. “By that time we hope to get everything electronically activated,” he said.
Accounts statements and contract notes sent by stockbroker firms to their clients and CDS monthly statements sent to account holders will also be converted from paper to e-mail.
Indeed, the shutdown of the postal department during Sri Lanka’s lockdown was one of the reasons that CSE operations had to cease during that time, according to SEC.
The rule amendments also enable listed companies to send annual reports to their shareholders by email, and dividend payments by electronic bank transfer.