Debt securities

CSE implements new OTC platform to conduct REPO transactions in debt securities – Lanka Business Online

Colombo Stock Exchange (CSE) announces the introduction of a new over-the-counter (OTC) platform to facilitate repurchase (REPO) on corporate debt securities starting today (September 16 2021).

The new OTC platform is an important step in CSE’s product expansion range and is expected to establish a dynamic REPO market for debt securities listed on the CSE.

Considering the large volumes of fixed income securities actively traded by market participants outside of the CSE platforms, the CSE observed the opportunity to play a facilitating role by matching providers of securities with collateral. who need to fund their liquidity needs with liquidity providers.

The purpose of implementing this mechanism is to enable market players to carry out REPO operations using the facilities offered by the CSE as an intermediary at a reasonable price and to improve the liquidity of the market for the corporate debt listed on the CSE. The OTC platform would be an addition to trading in corporate debt securities on the ATS. The mechanism will also help create a new opportunity for investors, trade members and other companies involved in the fixed income market in Sri Lanka.

The CSE focuses on several advantages of the new OTC platform. The transaction details provided by both trading parties will be compared by the CSE when reporting the REPO transaction. Therefore, the parties can ensure that the trade is executed with the exact terms agreed upon beforehand, unlike correspondence through an automated trading environment. In addition, warranty replacement and rolling REPO transactions are also facilitated on the OTC platform, which are not available in ATS.

The OTC platform can only be used by market participants for REPO transactions on corporate debt securities. Initially, REPO transactions would only be allowed on corporate debt securities listed through the OTC platform. Any investor who is an “Eligible Investor”, as defined in the Rules governing the OTC Platform, may trade on the OTC Platform.

The new OTC platform has been implemented based on the consultations CSE has had with stakeholders and fixed income market experts in order to make the platform workable.

The changes to the trading rules and CDS rules have been approved by the Securities & Exchange Commission of Sri Lanka (SEC).

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