How to invest in the Colombo Stock Exchange
will provide potential investors with the information they require to begin investment in the CSE:
How to open a CDS account
If an investor wishes to conduct share transactions through the CSE, he/she should open a securities account in the CDS through a participant organization (a Stockbroker or a custodian bank). The applicant has to submit
the duly completed Client Account Opening Forms, together with the relevant supporting documents, to the participant. After scrutinizing the account opening documents, inclusive of the supporting documents, the CDS will register
the applicant in the CDS system. Once the registration process is completed, the CDS system will generate an acknowledgment slip (CDS Form 13) with the Client Account Number. This acknowledgment would be handed over to the participant confirming the CDS account opening.
Details regarding the required documents for different individuals/entities can be found at the links below:
- Local companies, foreign companies and designated
accounts (margin trading accounts, collateral accounts
- Resident individuals, plantation employees (if the
NIC is not available) and internally displaced persons (IDPs):
- Non-resident foreigners and non-resident Sri Lankans:
Trading on the CSE
To trade in the secondary market, the investor must contact his/her stockbroker. This can be done through a personal visit, by phone or fax or through brokers who provide online trading. As at 31 December 2013, 284
companies were listed on the CSE.
As at 31 December 2013, 142 corporate debt securities were listed on the CSE. All government debt and corporate debt securities are tradable through the Automated Trading System (ATS).
The CSE has two main price indices (the CSEALL and S&P SL 20) and 20 sector price indices. Index values are calculated on an ongoing basis during trading sessions, with closing values published at the end of regular trading
The All Share Price Index (CSEALL)
CSEALL is a market capitalization-weighted index wherein the weight of a company is taken as the number of ordinary shares listed on the market. This weighting system allows the price movements of larger companies
to have a greater impact on the index. This kind of weighting system was adopted on the assumption that the general economic situation has a greater influence on larger companies than on smaller ones. The S&P Sri Lanka 20 (S&P SL 20)
The index consists of the largest blue chip companies based on total market capitalization, with the highest liquidity listed on the Sri Lankan stock market. The S&P SL 20 follows the methodology of Standard & Poor's
indices in order to provide consistency, transparency and liquidity. The index was designed to be a basis for tradable products, acting as a cost-effective and relatively simple method of replicating trading instruments, with possible use as index funds and exchange-traded funds (ETFs). To warrant inclusion in the S&P SL 20, stocks have to meet the standards set for size, liquidity and financial viability.
- Size: Stocks are included only if they have a
float-adjusted market capitalization of more than
LKR500m as of the rebalancing
reference dates. Stocks listed on the index have a
three-stock buffer to be listed, i.e. a stock has to
the top 23 in order to remain listed. If a stock listed on the index experiences a fall in market capitalization to less than LKR500m, but is still at more than LKR300m, the stock will remain listed, given that it still ranks within the top 23 and
meets all other required criteria.
- Liquidity: In order to ensure the maintenance
of liquidity, a minimum six-month average daily value
traded (ADVT) of
LKR1m is required. At each reconstitution, which occurs
annually, companies listed on the index must maintain
at LKR0.7m-1m in order to remain eligible.
- Financial viability: In order to maintain eligibility, stocks must continue to be profitable, which is determined by earning positive net income over the 12-month period preceding the re-balancing reference rate.
Return Indices (TRIs)
The CSE also publishes TRIs, which reflect returns due on both share price movements and dividend income.
|Exhibit 44: Trading Hours [Monday - Friday (Except CSE holidays)]|
|Open auction call||9.00 am-9.30 am|
|Regular trading||9.30 am-2.30 pm|
|Market close||2.30 pm|
Open Auction Call
During open auction call (9.00 am-9.30 am), the system accepts orders. These orders can be amended and cancelled during this session. However, no trades take place during this stage. Orders during this period are
held in the ATS and will be forwarded to the execution engine. At 9.30 am, the system starts matching orders according to an algorithm. It establishes the opening price and determines the orders to be executed according
to the rules of the open auction call session (Automated Trading Rule 4).
During regular trading (9.30am- 2.30pm), new orders are continually matched to existing orders in the order book. If an order cannot be executed, it is stored in the order book.
In the event that the S&P SL20 Index drops 5% within a day from the previous market day's close, a "Market Halt" is imposed on all equity securities for a period of 30 minutes. If the above scenario takes place at 2.00
pm or later, the market is halted and closed at 2.30 pm. Broker firms may cancel any pending orders