Broker limits on lending at CSE

The Securities and Exchange Commission said this week that the percentage of credit which may be extended by brokerage firms to their clients, in accordance with Rule 25(iii) of the Member Regulations, is amended to reflect 50% instead of 75%, as is currently stated, and that the same be incorporated to the Member Regulations of the Colombo Stock Exchange with effect from January 1, 2008.

The rule will limit brokerage firms from lending more than 50% of the market value of an investor’s portfolio. This is in line with the internationally accepted credit margin exposure limit, which is followed by advanced jurisdictions and large markets such as USA, and India.

It is expected that this initiative will further complement the risk mitigation and management stance the commission has adopted with the reduction of the settlement cycle risk by adopting a single tier settlement cycle (T+3) with effect from December 10, the SEC said.