The Colombo Stock Exchange (CSE) will launch a Central Counterparty (CCP) framework next month, marking a significant advancement in the evolution of Sri Lanka’s capital market infrastructure.
The CSE has progressively worked towards CCP implementation by setting up a separate entity to address these inefficiencies, obtaining regulatory approvals, making system modifications, and creating stakeholder awareness. These progressive steps mark the journey from a simple DvP model to a sophisticated, CCP-led settlement ecosystem.
The new company incorporated, CSE Clear (Pvt) Limited, is a fully owned subsidiary of the CSE that will act as the CCP for all equity transactions executed at the CSE. CSE Clear is a licensed clearing house, egulated by the Securities and Exchange Commission of Sri Lanka (SEC).
In essence, in the current settlement model, there is no guarantee of settlement; if one party defaults, all other parties are exposed, which can lead to cascading failures in the market. In summary, a CCP plays a critical role in modern financial markets – acting as an intermediary between trading parties, guaranteeing trades, managing risks, and providing the infrastructure to keep exchanges operating safely and efficiently even during times of market stress.
Chief Executive Officer of the CSE, Rajeeva Bandaranaike said, “With a CCP in place, Sri Lanka’s capital market becomes more resilient, trustworthy, and globally competitive.”
