SEC-CSE meeting with brokers ends in impasse
Thursday’s meeting between the Securities and Exchange Commission (SEC), the Colombo Stock Exchange (CSE) and CEOs of stockbroker firms on the current status of the stock market pretty much ended in an impasse ahead of the Delivery versus Payment (DvP) trial which runs tomorrow.
With the sharp drops in the CSE indices, certain stockbrokers aren’t too happy with the DvP, a settlement method that guarantees the transfer of stocks only happens after payment has been made. They say this will tend to drop CSE’s liquidity some more. “If the market declines further, the DvP will mop up the liquidity some more. It isn’t the right time to launch it,” a stockbroker told the Business Times.
But the proponents say this system is a big part of building trust with foreign clients which is important right now with many foreigners in a major sell off.
However what was merely talked about for over a decade must make its entrance at some point. But brokers haven’t still been told of the intended trial runs tomorrow with some wondering if it’ll actually happen.
The CSE board is yet to approve the relevant rules after which the SEC will sanction them.
In the aftermath of certain brokers getting letters from the SEC, the circulars on credit exposure came which was a double whammy for the brokers. This probably is why they had sought further clarification at Thursday’s meeting from the SEC on the previous CSE circulars which saw brokers requesting the SEC to clarify CSE circulars in the past two weeks saying there were misperceptions in the market relating to extending credit on certain stocks. “Candid views were expressed between the parties and the stockbrokers expressed their views with regard to the information that has been called for by the circular issued by the CSE. The stockbrokers expressed the view that there had been some misconception that this information was to be gathered in order to curtail the credit that has been extended by the stockbroker firms. SEC Chairman Viraj Dayaratne explained that such information was anyhow been collected on a fortnightly and monthly basis and considering the dynamic nature of the market some such information was required to be submitted on a weekly basis and that it was in no way meant to curtail credit granted by the stockbrokers,” a SEC Media release issued on Thursday said. The release was a ‘damage control’ document which was also prompted by certain high networth investors’ ‘whining’, according to those in the know.
The CSE was halted for the fourth time in five days with Thursday witnessing the circuit breaker kicking in twice.
In the milieu, SEC’s social media is requesting investors to check the fundamentals before investing.
The stock broking houses and their managements were casually told by the regulator that it is a business they run. “It was implied that if they do things to harm the sanctity of the market, it is their business that will suffer,” a source reiterated to the Business Times. (DEC)