In a bid to attract foreign investment, the Colombo Stock Exchange (CSE) is on target towards introducing the global index under the Standard & Poor’s (S&P) banner by the end of first quarter next year, CSE sources said.
“We are looking at introducing a global index by March- April next year and we already are working on this target,” a CSE source told the Business Times. He added that a team from S&P was in Colombo to meet key stakeholders recently.
He highlighted the main reason to introduce such an index was to have a globally recognized brand which will give credibility to the index, in particular to large foreign investors. He also said that S&P, together with the CSE, will develop criteria for inclusion in this index and that the existing indices such as the Milanka and All Share Index will continue to be available.
He also said that the systems at the exchange will be upgraded and modernized within a year. The CSE has also hired Mckinsey Consulting to do a study of the capital markets in the country and recommend a way forward and action plan to develop the capital markets. He also said that the CSE has hired the National Stock Exchange of India (NSE) to act as a consultant to implement a risk management system and a delivery versus Payment (DVP) settlement system. “By implementing DVP, both the ownership transfer and payment for securities will occur simultaneously, thus minimizing risk. The implementation of DVP and risk management practices is to be completed in mid-2012 and will be a first step towards transforming the CSE into a modern exchange on par with the most developed global exchanges,” he noted.
He said that the strategy for implementation of risk plans at the CSE envisions an extensive consultation process with market participants, custodians, investors and regulators. For the successful completion of the process brokers and other participants would have to take steps to convert to the new settlement mechanism and risk management practices.
This would entail meeting necessary technical requirements, streamlining of back office operations, participating in related training and adopting of certain procedures in particular with respect to the maintaining of liquid assets for margining requirements.