The Colombo Stock Exchange (CSE) has reassured stockbrokers and investors that its recent Circular does not in any way place any restrictions on the ability of firms to extend credit on any particular security, nor has it placed any limitations of any kind on the tradability of any security by any investor.
The assurance follows widespread concerns followed by a stock market crash (market capitalisation plunged by Rs. 245 billion) on Tuesday, allegedly over the Circular dated 15 February, updating brokers of new measures on monitoring credit exposure undertaken by stockbrokers.
Since the Circular “appears to have caused certain misperceptions among some investors”, the CSE’s Chief Regulatory Officer Renuke Wijayawardhane issued the following clarification to brokers.
CSE welcomes the recent heightened activity levels of the stock market. The CSE is also acutely aware of its responsibilities in supporting the medium and long-term sustainability of a robust market and the best interests of all market participants.
Maintaining a stable stock market in the medium and long term is a priority for the CSE.
The said Circular merely requested information on credit extended by Stock Broker Firms, as done routinely, to enable the SEC and CSE to better understand the nature of such credit extended purely for purposes of analysing and assessing systemic risk in fulfilling its functions to maintain the stability of the market and for the protection of investors and not to single out any specific listed entity or investor.
The above-mentioned information from stockbroker firms would allow the CSE to anticipate and manage systemic stability proactively.
The Circular has not in any way placed any restrictions on the ability of stockbroker firms to extend credit on any particular security, nor has it placed any limitations of any kind on the tradability of any security by any investor.
Any information collected through this process will only be used for internal analysis purposes and will be kept strictly confidential. The CSE’s objective is to monitor aggregate market-wide information. Responsibility for managing individual client-level exposure will remain the responsibility of the respective stockbroker firm.
(FT)