CSE Archives - Page 2 of 23

December 19, 2023

The Colombo Stock Exchange (CSE), along with the Securities and Exchange Commission of Sri Lanka (SEC), revised the Corporate Governance Rules for the Listed Entities after 16 years. These revised rules are applicable to companies listed on the Main Market Segment, i.e. the Main Board, Diri Savi Board and Catalyst Board, from 1^st October 2023, subject to certain transitional provisions.

Corporate Governance Rules are quite significant for listed companies as they play a crucial role in ensuring transparency and accountability and enhancing trust and credibility of the company. The revised Corporate Governance Rules of the CSE were formulated in line with global best practices and will go a long way in enhancing investor confidence in the capital market. The new rules would attract more investors to the stock market and also create a more welcoming eco system for the companies to list on the stock exchange. These rules are aimed at promoting responsible, ethical, and transparent business practices, which would reduce the cost of capital for listed companies and contribute to their long-term sustainability.

When formulating the revised Rules, the SEC and CSE conducted several public consultations from 2021 to 2023 and considered the views received therefrom in formulating the rules.

Furthermore, CSE, in collaboration with SEC, also conducted a series of awareness sessions on the revised Corporate Governance Rules for the listed companies in the Banking Sector, Insurance Sector (with the Insurance Regulatory Commission of Sri Lanka), and other industry sectors.

SEC Chairman Faizal Salieh delivered the keynote address and Chief Regulatory Officer of CSE Renuke Wijayawardhane made the detailed presentation of the rules of these sessions which also included a ‘Q & A’. Notable speakers during the Question and Answer sessions included the SEC Chairman, Mr Razik Zarook, Chairman, Insurance Regulatory Commission of Sri Lanka (IRCSL), Mrs. Yvette Fernando, Commission Member SEC and IRCSL, Mr. Sujeewa Mudalige, Commission Member SEC, Mr. Manil Jayasinghe, Commission Member SEC, Mr. Sanjaya Bandara, Commission Member SEC, Mr. A.K. Seneviratne, Commission Member, IRCSL, Mr. Ray Abeywardane, Director CSE, Mr. Chinthaka Mendis Director General SEC, Mr. Rajeeva Bandaranaike, Chief Executive Officer, CSE, Mrs. Damayanthi Fernando, Director General IRCSL, Mr. Renuke Wijayawardhane, Chief Regulatory Officer, CSE and Ms. Manuri Weerasinghe, Director Corporate Affairs, SEC who shared their expertise and engaged in a lively exchange of ideas. Senior management and staff from the SEC, CSE and IRCSL were also present at the sessions

Senior officials of the CSE also presented the new Corporate Governance Rules at several seminars/awareness sessions held by other organizations, enabling the listed entities and the relevant stakeholders to gain much-needed knowledge on these Rules.

Some of the key changes introduced via the new Corporate Governance Rules include specifying a minimum number of directors and Independent Directors for listed entities, appointment of a ‘Senior Independent Director’ in certain specific instances, establishment and operationalization of a Nomination and Governance Committee, change in the composition and functions applicable to the Audit, Remuneration and Related Party Transaction Committees, introduction of Fit and Proper criteria for Board members and CEO, changes to determine the criteria for ‘independence’, additional disclosure requirements on governance-related matters etc.

Several listed companies have commenced compliance with the new Corporate Governance Rules, well ahead of the timelines specified in relation to some of the new requirements and have been actively engaged with the CSE and SEC on connected matters.

The revised Corporate Governance Rules are not applicable to the companies listed on the Empower Board.

Visit www.cse.lk to view the FAQs related to the Revised Corporate Governance Rules.

December 15, 2023

The Colombo Stock Exchange (CSE) announces the following change in S&P Sri Lanka 20 index constituents made by S&P Dow Jones Indices at the 2023 year-end rebalance.

The exclusion and inclusion as announced by S&P Dow Jones Indices, effective from 18^th Dec 2023 (after the market close of 15^th Dec 2023) are presented below.

Exclusions

No.	Company	CSE Ticker
1	Browns Investments PLC	BIL.N0000
2	Dipped Products PLC	DIPD.N0000
3	Expolanka Holdings PLC	EXPO.N0000
4	Richard Pieris & Co PLC	RICH.N0000
5	Sri Lanka Telecom PLC	SLT.N0000

Inclusions

No.	Company	CSE Ticker
1	DFCC Bank	DFCC.N0000
2	Dialog Axiata PLC	DIAL.N0000
3	Distilleries Company of Sri Lanka PLC	DIST.N0000
4	Hatton National Bank PLC	HNB.N0000
4	Hatton National Bank PLC	HNB.X0000
5	Nations Trust Bank PLC	NTB.N0000

The S&P SL 20 index includes the 20 largest companies, by total market capitalization, listed on the CSE that meet minimum size, liquidity and financial viability thresholds. The constituents are weighted by float-adjusted market capitalization, subject to a single stock cap of 15%, which is employed to reduce single stock concentration.

The S&P SL 20 index has been designed in accordance with international practices and standards. All stocks are classified according to the Global Industry Classification Standard (GICS®), which was co-developed by S&P Dow Jones Indices and MCSI and is widely used by market participants throughout the world.

To be eligible for inclusion, a stock must have a minimum float-adjusted market capitalization of 500 million Sri Lankan rupees (Rs), a six-month median daily value traded of Rs 0.25 million and have positive net income over the 12 months prior to the rebalancing reference date. For information, including the complete methodology, please visit: www.spindices.com

Effective from 18^th December 2023 the stocks in the S&P Sri Lanka 20 in alphabetical order are as follows.

No.	Company	CSE Ticker
1	Chevron Lubricants Lanka PLC	LLUB.N0000
2	CIC Holdings PLC	CIC.N0000
2	CIC Holdings PLC	CIC.X0000
3	Commercial Bank of Ceylon PLC	COMB.N0000
4	DFCC Bank	DFCC.N0000
5	Dialog Axiata PLC	DIAL.N0000
6	Distilleries Company of Sri Lanka PLC	DIST.N0000
7	Hatton National Bank PLC	HNB.N0000
7	Hatton National Bank PLC	HNB.X0000
8	Hayleys PLC	HAYL.N0000
9	Hemas Holdings PLC	HHL.N0000
10	John Keells Holdings PLC	JKH.N0000
11	Lanka IOC Ltd.	LIOC.N0000
12	LOLC Finance PLC	LOFC.N0000
13	LOLC Holdings PLC	LOLC.N0000
14	Melstacorp PLC	MELS.N0000
15	National Development Bank PLC	NDB.N0000
16	Nations Trust Bank PLC	NTB.N0000
17	Royal Ceramics Lanka PLC	RCL.N0000
18	Sampath Bank PLC	SAMP.N0000
19	Softlogic Life Insurance PLC	AAIC.N0000
20	Vallibel One PLC	VONE.N0000

For more information:

About the Index Media Relations

Nishantha Hewavithana Niroshan Wijesundere

Senior Vice President – Research & Strategy Senior Vice President – marketing

Colombo Stock Exchange Colombo Stock Exchange

+94 112 356524 +94 112 356510

nishanthah@cse.lk niroshan@cse.lk

December 12, 2023

The Colombo Stock Exchange (CSE) recognized the students from batch six of the Advanced Diploma in Financial Markets (ADFM) at a ceremony, which was held recently at the Union Ballroom, Hilton Residencies Colombo.

The event marks a milestone in the CSE’s efforts to foster financial literacy and education in the capital market, as it is the first educational qualification to be awarded by the Stock Exchange.

The Chairman of the CSE, Mr. Dilshan Wirasekara, was the Chief Guest of the occasion, and the Keynote Address of the Ceremony was delivered by Senior Professor Hareendra Dissabandara. CSE CEO Mr. Rajeeva Bandaranaike, CSE senior management, lecturers, students, and their parents also participated in the awards ceremony. Further, 37 students were recognized at the ceremony.

The ADFM was implemented in response to a growing demand for an entry-level academic qualification to be awarded by the CSE to enable greater knowledge of financial markets, particularly with a specific focus on capital market operations and investment.

ADFM features 10 modules and was completed over a period of nine months, covering areas such as capital market regulations, investment analysis, portfolio management, macro-economics, and other related subject matters. The course content featured a combination of theory and practical aspects of financial markets and included the management of a model portfolio by the students, integrating real-world expertise with practical skills. The modules were conducted by an eminent panel of lecturers, consisting of respected local university lecturers and capital market experts.

Congratulating the ADFM students of batch six, CEO of the CSE, Mr. Rajeeva Bandaranaike, shared his remarks on the CSE Academy, “We established the CSE Academy by consolidating all the work we have been doing with schools and other groups. Only 22.98% get the opportunity after A/Ls to enroll in a state university. The majority always seeks vocational qualifications from foreign or local bodies, and we see there is a huge opportunity for us to fill this gap. The CSE Academy has been given the task of leading this initiative from the side of CSE in assisting and creating a financially literate investor base.”

The Chief Guest of the ceremony, the Chairman of the CSE, Mr. Dilshan Wirasekara, stated that this event celebrates the achievements of students in the setting that is the heart of the Sri Lankan Capital Market. “I must congratulate ADFM for creating a pool of talented individuals with the competencies that are required to bring value to the industry.”

Concluding his speech, Mr. Wirasekara also reminded the students that there is responsibility for them: “There is no better time to be in capital markets than currently. You are coming into a vibrant ecosystem. If you look at all the aspects of the capital markets, we see phenomenal growth. I sincerely hope that all the graduates will choose to remain in the industry, and I would appeal to you to see how you could deploy the knowledge from the qualification that you have now obtained and contribute far more.”

The keynote speaker for the ceremony, Senior Professor Hareendra Dissabandara, showcased an insightful presentation on the importance of financial literacy.

More information on the course and details on the next intake can be obtained by calling 0112356456

December 11, 2023

The Colombo Stock Exchange (CSE) joined over 24 stock exchanges globally for a call to action for climate change with its inaugural Market Opening Bell Ringing Ceremony for Climate Change on 05^th December 2023 at the trading floor of the CSE.

Delivering the keynote address at this ceremony, Ms. Azusa Kubota, Resident Representative, UNDP Sri Lanka, emphasized that “Symbolically ringing the bell is very apt–not because it is the festive season, but these are times that we have to find every loud bell we can find, and ring it as an alarm bell to convey the message loud and clear. As per the UN Secretary General – the world is boiling- every year is the hottest year. Evident from all the discussions happening at COP28– Climate Change is the most pressing issue and Sri Lanka is one of the top 10 most climate vulnerable countries.”

She added, “On average Sri Lanka experiences US$313 million in annual disaster losses. UNDP and Oxford University developed Sri Lanka’s first Multidimensional Vulnerability Index (MVI) this year – post pandemic, which illustrated that more than half of the population is multidimensionally vulnerable, and almost half of the population lacks disaster preparedness. This means, if a disaster hits, they have nothing to protect their livelihoods or assets with. They will fall right into the perpetual cycle of poverty.”

She further stated that “we at UNDP are truly excited about the upcoming partnership with the Colombo Stock Exchange. We will continue to work together with partners to leverage the Sri Lankan capital market for sustainable development, enhancing its development activities in promoting the SDGs among the private sector in Sri Lanka, incorporating sustainability into the private sector’s business strategy and processes and promoting innovative and sustainable finance products and tools.”

Mr. Dilshan Wirasekera, Chairman, Colombo Stock Exchange, speaking at the event, said, “ Climate Change is one thing that is impacting the humanity across geographics and it is the one thing that we all need to work together to eliminate or at least to reduce the impact. This is an area of great concern as it has become a matter of life or death for the present and future generations.”

He further added that the CSE has been encouraging and driving an initiative for listed entities to adopt sustainable practices and has taken many initiatives on its own including the introduction of a new product suite to include green and blue bonds. We invite listed and unlisted representatives to take the opportunity to attract capital flows that are moving towards compliant investments globally- which will not only essentially help climate change but also the economy as a whole with much needed capital inflows while assisting Sri Lanka to ultimately achieve net zero target by 2050.”

Ms. Nandini Sukumar, Chief Executive of the WFE in a message to mark the occasion stated that “By ringing the bell, exchanges acknowledge their central role in addressing the climate crisis and advancing sustainability efforts. As climate change continues to be a pressing global issue, the involvement of financial markets, and the exchanges at their heart, is crucial in driving the transition to a more sustainable and environmentally friendly economy.”

Mr. Rajeeva Bandaranaike, Chief Executive Officer in his remarks stated that the CSE is pleased to be an early mover along with the other members of the World Federation of Stock Exchanges (WFE) in the Climate Change Initiative by ringing the bell coinciding with a series of other events and workshops that are being held alongside the COP28 in Dubai. Stock exchanges are at the core providing much needed capital flows to be deployed for sustainable developments. Without appropriate financing in place – green transition cannot take place.”

He added that “the Green Equity Principals that were recently issued by WFE is a global framework that stock exchanges can adopt. Digitization of the local capital market has driven a paperless environment. By going digital the CSE has also reduced the footfall to the main office, branches and stockbroker offices thereby positively contributing to energy usage. The CSE is also actively encouraging companies to be sustainable by embracing the green frameworks and adopting sustainable reporting via GRI. CSE has also launched the 3^rd version of the Sustainability Guide last week. The S&P co-branded ESG Index is expected to be launched in January 2024 to attract sustainable investments.”

Representatives from listed and unlisted companies and audit firms graced the occasion.

December 5, 2023

The Colombo Stock Exchange (CSE), in collaboration with the Global Reporting Initiative (GRI), developed the 3rd version of the sustainability reporting guide, which was ceremonially launched today at the Market Opening Bell Ringing ceremony held at the trading floor of the CSE. The publication is now available at www.cse.lk.

Delivering the keynote address at this ceremony, Mr. Faizal Salieh, Chairman, Securities and Exchange Commission of Sri Lanka (SEC), emphasized that “Sustainability reporting and disclosure have become the fastest-growing non-financial reporting type over the past 10 years. About 96% of the largest 500 companies by market cap had published sustainability reports in 2022. And the figure is up from 86% in 2018. Many more companies have adopted sustainability reporting over the past two years.”

“One of the most widely recognized sustainability reporting standards is the GRI standard. The GRI standards are designed to help organizations respond to emerging information demands from stakeholders and regulators and are regularly reviewed to ensure they reflect global best practices on sustainability reporting. The benefits of sustainability reporting will help companies gain a foothold in the future economy, and it will lead to new and improved products, services, and business models. That, in turn, will attract more customers and improve the financial performance of companies.”

Mr. Dilshan Wirasekera, Chairman, Colombo Stock Exchange, speaking at the event, said, “As the Colombo Stock Exchange, we are proud to introduce the 3rd version of the guidance document aimed at fostering sustainability reporting among our listed companies. Embracing sustainability not only ensures responsible business practices but also drives long-term value creation. This initiative aligns with our commitment to cultivating a thriving, sustainable market that benefits all stakeholders—companies, investors, and the community alike.”

Dr. Aditi Haldar, Director, GRI South Asia, made her observations at the event and said, “Our latest guidance document for listed companies in Sri Lanka on communicating sustainability represents a significant evolution, seamlessly incorporating the perspectives and standards set by the Global Reporting Initiative. This comprehensive resource offers a panoramic overview of the sustainability reporting landscape and its fundamental principles. Beyond being an informative tool, it serves as a compelling catalyst, inspiring Sri Lankan companies to embark on their sustainability reporting journeys and encouraging others to enhance their existing practices.”

To coincide with the launch of the CSE Sustainability Reporting Guidelines, the CSE, in collaboration with GRI South Asia, also organized an informative knowledge session focused on Corporate Sustainability Reporting in Sri Lanka for the representatives of listed companies. This session aimed to provide an outline of the existing standards and valuable insights into the latest developments in standards, offering a comprehensive overview. The session, facilitated by Mr. Rahul Singh, Manager at GRI South Asia, was designed not only for established GRI reporters but also to support preparers embarking on their sustainability reporting journeys.

Ms. Aruni Rajakarier, Founder and Director at SheConsults, led a detailed exploration of the recent survey on sustainability reporting in Sri Lanka at the workshop. Through an objective analysis of the country’s progress, Ms. Rajakarier shared key insights and recommendations derived from the survey.

Ms Nilupa Perera., Senior Vice President, Broker Supervision & Listed Entity Complianceof the Colombo Stock Exchange discussed the framework for listing of Green Bonds.

December 4, 2023

The Colombo Stock Exchange (CSE) conducted an Issuer Forum titled “ඔබේ ව්‍යපාරයේ ඉදිරි ගමනට නව ප්‍රවේශයක් (A New Approach for the Future of Your Business), in association with the U.S. Agency for International Development (USAID), on 29^th November 2023 in Kandy.

The objective of the forum was to provide an insight for small and medium enterprises to discover capital-raising opportunities available at the CSE via listing on the Empower and Dirisavi Boards of the Exchange. Thus, the program was mostly oriented towards companies in agribusinesses, livestock, energy generation, and tourism-related businesses.

The forum drew interest from many entrepreneurs in the area. The delegation included Mr. Suraj Suraweera, CEO, Chrissworld PLC, Mr. Rohan Senewiratne, Managing Director, Atarah Capital (Pvt) Ltd., Ms. Delrene Seneviratne, Deputy Activity Team Lead, USAID Palladium, Mr. Jude Fernando, Director Financial Facilitation, USAID Palladium, and representing CSE, Mr. Rajeeva Bandaranaike, CEO, Ms. Punyamali Saparamadu, SVP–Commercial, Mr. Kassapa Weerasekara, Senior Assistant Manager–Listing, USAID staff, Mr. Dananjaya Abeysiriwardana Manager Kandy branch and CSE staff members.

Delivering the opening remarks, CSE CEO, Mr. Rajeeva Bandaranaike, said, “Having sustainable capital flows and financial freedom is important in reaching greater heights for a business which can be achieved through capital market instruments.

Expressing his experience with listing, Mr. Suraj Suraweera, CEO, Chrissworld PLC, stated, “Listing has led Chrissworld to obtain recognition and attract quality talent; the value addition from the listing has far outweighed the costs, and it has unlocked our true potential.”

Conducting a session on “Benefits and Misconceptions of Listing at CSE,” Mr. Rohan Seneviratne, Managing Director, Atarah Capital (Pvt) Ltd., stated, “One of the most important aspects of listings is price discovery to reveal a company’s true value, and the key pre-requisite for this will be the mindset change to comply with higher standards.”

An insightful panel discussion was also held on the subject of “Journey towards listing and life after listing” towards the end of the forum, with the participation of Ms. Delrene Seneviratne, Mr. Rohan Senewiratne, Mr. Suraj Suraweera, Mr. Kassapa Weerasekara, and Ms. Punyamali Saparamadu as the moderator.

November 30, 2023

The Colombo Stock Exchange (CSE) has approved in principle the listing of Commercial Bank of Ceylon’s Rs 6 billion Debenture Issue opening on Tuesday 12^thDecember 2023.

The Bank has announced an initial issue of 60 million Basel III Compliant – Tier 2 Listed Rated Unsecured Subordinated Redeemable Debentures with a Non-Viability Conversion feature, at the par value of Rs 100/= each, to raise Rs 6 billion, with an option to issue up to another 60 million Debentures to raise an additional Rs 6 billion at the discretion of the Bank in the event of an oversubscription of the initial issue.

The Bank said the issue will further strengthen its Tier II capital base, raise funds for the expansion of its lending portfolio, and bridge maturity mismatches in the assets and liabilities portfolio of the Bank.

The Debentures will be offered in three tenures – Types A and B with a five-year tenure, Types C and D with a seven-year tenure, and Types E and F with a 10-year tenure, the Bank said.

Type A will carry a fixed interest rate of 14.50%. p.a. (AER 15.03%) payable semi-annually; Type B 15.00% p.a. (AER 15.00%) payable annually; Type C 13.75% p.a. (AER 14.22%) payable semi-annually; Type D 14.25% (AER 14.25%) payable annually; Type E 13.50% p.a. (AER 13.96%) payable semi-annually; and Type F 14.00% (AER 14.00%) payable annually.

The minimum subscription per application for an individual Qualified Investor is set at Rs 5 million, and the minimum subscription per application for other Qualified Investors at Rs 10,000/- or 100 Debentures.

The Debentures are rated BBB+ (lka) by Fitch Ratings Lanka Limited. The Investment Banking Division of Commercial Bank of Ceylon PLC is the Manager to the Issue.

More details of the Debenture Issue can be obtained from the application form and prospectus on the Bank’s website www.combank.lk and the Colombo Stock Exchange’s website www.cse.lk and are available with Trading Participants of the CSE. The Bank said applications can be handed over at any Commercial Bank branch.

For the nine months ending September 2023 the Commercial Bank Group reported gross income of Rs 255.963 billion, total operating income of Rs 86.45 billion, profit before tax of Rs 25.031 billion and profit after tax of Rs 14.764 billion, with total assets reaching Rs 2.526 trillion, loans and advances totalling Rs 1.239 trillion and total deposits exceeding Rs 2.038 trillion as at 30^th September 2023.

November 9, 2023

“This partnership would provide an opportunity for our undergraduates to have a sound knowledge of the capital markets.” – Vice Chancellor, University of Sri Jayewardenepura

“This is an initiative to promote financial literacy among Sri Lankans, especially among undergraduates, who are a key segment of the population equipped to contribute to an economically stable future.” -CEO, CSE

The Colombo Stock Exchange (CSE) recently signed a Memorandum of Understanding (MoU) with the University of Sri Jayewardenepura, to formalize collaborative efforts to improve the knowledge of capital markets among undergraduates in Sri Lanka.

The collaboration proposes to promote capital market education among undergraduates by working together on a number of mutually beneficial strategic initiatives. Accordingly, the initiative would offer practical educational training and internship opportunities for students of the University of Sri Jayewardenepura who are engaged in accountancy and finance, business management, and economics-related degree programmes with the CSE.

Further, under the terms of the MoU, the CSE will grant an award to the student who performed outstanding performance in the research and commercialization of inventions in university.

The University of Sri Jayewardenepura will also collaborate with the ongoing educational initiatives of the CSE, including the Advanced Diploma in Financial Markets (ADFM), as well as in future educational activities by providing the required expertise and resource persons for the seminars and workshops organized by the CSE to investors around the country in promoting the capital market investments.

Commenting on the partnership, the CEO of the CSE, Rajeeva Bandaranaike, stated, ” This is an initiative to promote financial literacy among Sri Lankans, especially among undergraduates, who are a key segment of the population equipped to contribute to an economically stable future. We are pleased to partner with the University of Sri Jayewardenepura, promote engage in multiple collaborative capital market related initiatives with the undergraduate population.

The Vice Chancellor of the University of Sri Jayewardenepura, Senior Professor Pathmalal M. Manage, also shared his views and thanked the Colombo Stock Exchange, for signing the Memorandum of Understanding with the University of Sri Jayewardenepura to bring more opportunities to both parties.

“This strategic alliance between the University of Sri Jayewardenepura and the CSE would no doubt offer good opportunities to both parties; our undergraduates will stand a chance to be financially literate, while the CSE would be able to obtain resource personnel from our University for their educational initiatives.”

“Though Sri Lanka has a high literacy rate, financial literacy in the country stands at a lower rate, which should be a prime concern of the local Government. Our graduates who are going out from the University must know what the stock market is. So proper awareness of the stock market should be created among our youth, no matter which field they are from. So, this partnership would provide an opportunity for our undergraduates to have sound knowledge of the capital markets,” Snr Prof. Manage added.

November 7, 2023

The Colombo Stock Exchange (CSE) is pleased to announce that Regulated Short Selling (RSS) through Stock Borrowing and Lending (SBL) was successfully launched on the 6^th of November 2023. This initiative aims to promote market efficiency and enhance liquidity while improving the market microstructure of the CSE, aligning with international standards and best practices.

Prior to the launch, CSE conducted multiple workshops and awareness sessions (both physical and virtual) for the stakeholders and the general public on the RSS and SBL, which were well received by the participants.

With the launch, a few RSS and SBL transactions were recorded on the first day itself.

For more details on RSS and SBL, please visit the CSE website on www.cse.lk.

November 6, 2023

What is Stock Borrowing and Lending (SBL)?

Stock Borrowing & Lending (SBL) is a mechanism that is introduced by the Colombo Stock Exchange (CSE) through the Central Depository System (CDS) to facilitate the lending and borrowing of shares among investors. SBL involves connecting lenders of shares with borrowers for a pre-determined period and interest rate.

In order to carry out an SBL transaction on the CDS, the lender and the borrower must enter into SBL agreements with their respective CDS Participants, i.e., Stockbrokers or Custodian Banks.

What is Regulated Short Selling (RSS)?

Regulated Short Selling (RSS) is the sale of shares by a borrower of shares (the short seller) on the trading system of the CSE based on a SBL Agreement. RSS transaction is carried out by the short seller (borrower of shares) with the intention of buying back such shares at a future point in time, ideally at a price which is lower than the initial sale price, in order to deliver the said shares to the lender.

Under what circumstances Regulated Short Selling is permitted by the CSE?

A short seller could engage in a RSS transaction under two specific circumstances: either by borrowing the shares first and then executing the short sale transaction or by executing the short sale transaction first and then ensuring that the required number of shares are borrowed through an SBL transaction before the conclusion of trading on the same market day.

Under either of these methods, the borrower must enter into a SBL agreement with the Participant prior to entering the short sale order.

What are the eligible securities for RSS and SBL?

A list of shares will be specified by the CSE/CDS as “Eligible Securities” for both RSS and SBL. The list of Eligible Securities will be determined by the CSE/CDS on a criterion which is primarily based on liquidity. These Eligible Securities will be reviewed every three (3) months and the updated list will be duly published on the CSE/CDS websites.

What are the benefits to investors by participating in RSS?

Lenders of shares could lend part of their dormant portfolios which are not available for trading in the immediate future and earn a fee-based income during the SBL period.

Borrowers of shares could profit from potential price movements in the market by short selling the borrowed shares. If an investor is of the view that the price of a particular share eligible for RSS and BSL may decline in the future, he/she could borrow the shares from a lender and carry out a short sale transaction on the CSE. The borrowed stock can be sold in the market at the prevailing market price. The borrower has the obligation to return the shares to the lender on the agreed date. If the price of share declines (as he/she expected), the borrower (short seller) could make a profit as the difference between the price the shares were sold in the market through the short sale and the purchase price the shares will be his profit, minus the lending fee.

What are the measures adopted by the CSE to address a downfall in share prices due to RSS?

The shares eligible for RSS is selected based on a liquidity criteria where the most liquid as well as the less volatile shares are selected. Further, when the price of a share deprecates by 10% during the day, all RSS orders will be validated against an ‘Uptick Rule’. Under the Uptick Rule, all incoming RSS orders entered into the system after the 10% price depreciation must be at least one (01) tick size above the last traded price of that particular share.

Also, CSE has brought in an additional safeguard where, if the price of a share depreciates by 20%, RSS for the particular security will be temporally suspended until the price appreciates upto the permissible limit.

The objective of these measures is to minimize the acceleration of rapid declines in prices resulting from RSS transactions. Such measures would result in stabilizing the market, especially in downward market sentiments.

What about corporate action benefit, who will get the corporate action benefit from the company? Borrower or lender?

Since the Lender has already parted with the shares, he/she will not be eligible for corporate actions of the listed company arising during the SBL period. The borrower would have also carried out an RSS transaction and therefore, may not be entitled to the corporate action either. Whoever the shareholder who holds the shares on the ’Record Date’ of the corporate action will be entitled to the corporate benefit from the listed company.

However, as per the Rules of the CSE/CDS, the borrower must return to the lender all corporate benefits arising during the SBL period Therefore, an obligation will be created to the borrower to pay the value of the corporate action as a ‘manufactured payment’ to the lender in lieu of the corporate action benefit he would have received if he/she held the shares.

However, the lender can recall the shares from the borrower in instances where there are corporate actions are declared by the listed company by providing three (3) market days’ notice to the borrower.

What is the benefit to the Sri Lankan capital market as a whole?

Short selling enhances market efficiency and the market microstructure of the CSE. This improves the price discovery mechanism of the CSE by incorporating the views of the short sellers in determining the share price, effectively bringing the share price of an overvalued stock closer to its fundamental value. It also narrows the bid-ask spreads and minimizes the impact cost, which ultimately results in improving the liquidity of the market.

Introduction of short selling will also help the CSE to be on par with other regional exchanges which have already introduced this facility.

Any risks involved for Lender?

The risks to lender have been minimized to a greater extent through several risk mitigation actions by the CDS. In this regard, a question may arise whether the lender would receive the shares back from the borrower on the ‘Return Day’, as agreed by the borrower. As specified above, the shares subject to SBL and RSS are the most liquid shares listed on the CSE. Therefore, the borrower should not find it difficult to purchase the shares from the market in order to return such shares to the lender.

The CSE will closely monitor the SBL transactions and issue the required notices to the borrowers through their respective Participants (Stockbrokers and Custodian Banks) well in advance of the Return Date.

In a highly unlikely scenario where the borrower fails to return the shares and/or the lending fee to the lender on the Return Date, the CSE/CDS will ensure that the lender receives a monitory value in the form of a compensation, which is more than adequate to cover the market value of the shares on the Return date. This compensation comprises of the value of the shares based on the current market price, the lending fee and a penalty component, so that the lender will have adequate funds to buy the quantity of shares from the market on the next day.

For this purpose, the CSE/CDS would require the borrowers’ Participants (Stockbrokers and Custodian Banks) to maintain adequate collateral to support the SBL transactions on a continuous basis. Such collateral can be in the form of cash, bank guarantee or certain types of shares. The SBL transactions and collateral provided in the form of shares will be daily valued based on the current market prices, which ensures that sufficient collateral is available with CSE/CDS to be utilized in the event of a default scenario on any given day.

Further, the borrower is also under the obligation to return all corporate actions to the lender during the period. In the event of a breach, the CSE/CDS can utilize the collateral provided by the borrower’s Participant to pay the corporate benefit to the lender.

The lender also has the privilege of recalling the shares lent during the SBL period in the event of a corporate action or a voting announced by the listed company, with prior notice to the borrower. This minimized the risk to the lender as well. Additionally, RSS and SBL transactions will be carried out through regulated Participants of the CSE/CDS. They will be subject to certain enforcement actions in the event of breach.

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Corporate Governance Rules revised to drive Capital Market forward

Constituent Change in the S&P Sri Lanka 20 Index

CSE hosts the Awards Ceremony for the Advanced Diploma in Financial Markets for batch six – 2023

CSE Rings The Bell as a Call for Action for Climate Change

Launch of CSE Sustainability Reporting Guide & Awareness Session

CSE and USAID conducted an Issuer Forum in Kandy, providing insights on capital raising opportunities for SMEs in the region.

ComBank’s Rs 6 billion Debenture Issue to open on 12th December 2023

CSE enters into partnership with the University of Sri Jayewardenepura

CSE successfully launch Regulated Short Selling (RSS) through Stock Borrowing and Lending (SBL) on 6th November 2023

CSE Launches Stock Borrowing & Lending (SBL) and Regulated Short Selling (RSS)