SL Capital Market launches CCP
The capital market regulator is perusing six applications for the multi-asset class Derivative Exchange, officials said. “The Securities and Exchange Commission (SEC) has six applications, including that of the Colombo Stock Exchange (CSE), to set up and operate the derivative exchange of the country,” an official told The Sunday Times Business. The five parties that applied have come with international partners, they said. The CSE has applied with the Indian stock exchange.
A multi-asset class is an investment approach that combines asset classes, such as cash, equities, or fixed income. The most common underlying assets for derivatives are stocks, bonds, commodities, currencies, interest rates, and market indexes.
With the central counterparty (CCP) going live on Friday, the country’s capital market has made way for such an exchange. “In Sri Lanka, equities transactions have a 2-day time gap between trade execution and final settlement, introducing multiple layers of risk. These include counterparty risk, market risk, liquidity risk, and operational risk. If not managed properly, these risks can be severe, especially during market growth. Large-scale defaults can trigger market instability, while liquidity crunches can cascade through the financial ecosystem, amplifying systemic risk,” a CSE Official explained to the Business Times on Friday, noting the importance of the CCP. This is why a robust risk management system in post-trade operations is crucial for maintaining market stability and attracting international participation, he added.
The CCP plays a vital role in ensuring trade completion, even if one side defaults, according to the official. Sri Lanka’s implementation of the CCP will strengthen operational resilience and create conditions for a more vibrant, liquid, and internationally competitive market.
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