CSE lets primary dealers trade listed corporate debt

CSE lets primary dealers trade listed corporate debt
Published : 12:16 am May 19, 2014

The Stock Exchange has invited primary dealers and debt market specialists to register as trading members of the Colombo Stock Exchange (CSE) for debt securities. Three primary dealers have already obtained trading membership and the fourth primary dealer has submitted an application to the CSE.
These members are in addition to the existing debt trading members, Chief Operating Officer of the CSE Renuke Wijayawardhane disclosed.
The CSE has taken a series of aggressive measures to promote a vibrant corporate debt market and provide companies an opportunity to raise debt capital, while providing investors with an opportunity for diversification by investing in fixed income instruments.
The measures taken by the CSE seek to serve the needs of all stakeholders and include the admission of primary dealers as trading members, simplifying the requirements to issuer companies when issuing corporate debt securities, and providing the required training for stock brokers on debt instruments.
Pursuant to a decision taken in 2013, the admission of primary dealers as trading members, it is expected that experienced debt dealers would facilitate a more liquid secondary market for the corporate debt securities on the CSE, while utilising their experience in dealing in government debt securities.
The introduction of primary dealers as new debt trading members is pursuant to the policy initiatives taken by the joint SEC and CSE Committee on ‘Development of the Corporate Bond Market’ and is one of the tenants within the SEC’s 10 point plan for developing the capital market, CEO of the CSE Rajeeva Bandaranaike explained .
The creation of a more liquid secondary market for corporate debt securities would help investors, particularly retail investors, to benefit from investing and trading in a new asset class through the CSE.
To make the secondary market for corporate debt securities more vibrant, the CSE plans to introduce a REPO mechanism in the automated trading system. The CSE is currently having discussions with primary dealers and other market participants with the concurrence of the Central Bank in this regard.
As a means of encouraging companies to list corporate debt securities on the CSE, the Listing Rules have been eased, by minimising the paperwork required, especially for existing listed companies, when issuing new debt securities.
The CSE is also reviewing the Member Rules of the CSE to include provisions applicable to the debt dealers who will be transacting in debt securities.
CSE Head of Market Development Niroshan Wijesundere commenting on the training aspect said that investment advisors of broker firms were given training on operating in the new automated trading system version 7.14, upgraded during 2013. The training program consisted of a theoretical session and a practical session. During the latter session investment advisors were given a familiarisation on debt trading in the automated trading system and the CSE will repeat this program regularly.
The CSE is also reviewing the transaction costs relating to corporate debt securities, which would result in ensuring a more competitive pricing for secondary trading of corporate debt.
The CSE in 2013 saw 28 corporate debt IPOs raising over Rs. 68.2 billion, with a corporate debt market capitalisation of Rs. 165.7 billion. The new initiatives are expected to build on this momentum