What is Central Depository System Trading in CSE
The Central Depository System (CDS) acts as a
safekeeper for all securities traded on the Colombo Stock Exchange (CSE).
The CDS holds securities in trust on behalf of shareholders of
securities of listed companies. The CDS is a fully owned subsidiary of
the CSE.
When you buy shares or any other listed security such as debt
securities, the securities purchased will be transferred into your CDS
account. Similarly before you sell shares, those shares must be
deposited in your CDS account.
When you sell these shares it will be taken out of your account and
transferred into the buyers account instantly.
Listed securities could be either held in paper format (as share
certificates) or in the electronic form in your CDS account. However, to
buy or sell listed securities it is mandated by the CSE rules to use the
CDS account.
The CDS provides your details to the company that you are shareholder
or debenture holder of so that such companies would be able to dispatch
corporate actions such as dividends and also send you notices and annual
reports.
How do I open a CDS account?
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At the CSE trading floor |
It is mandatory that you open an account through a stockbroker.
All instructions to the CDS has to be given through the stockbroker
you are registered with. To open a CDS account, you must first complete
an account opening form. All stock brokers have this form readily
available.
The completed form will be forwarded to the CDS by the stock broker
and an account will be opened in your name. Joint accounts can also be
operated. There is no payment involved to open a CDS account.
To open the account you will have to give the broker a photocopy of
your -
* National Identity Card (NIC),
* A bill to prove your billing address,
* Make available your NIC and original bill for inspection.
In the absence of an NIC, a valid passport is also an acceptable
identification document. When buying shares in the Primary Market the
investor has the option of asking for the shares in paper format (Share
Certificates) or requesting the shares to be directly deposited in the
CDS account (in electronic form). If an individual wants to withdraw
his/her shares from the CDS account and keep them in paper format, the
CDS will provide this service, free.
It is always advisable to deposit your securities in the CDS as it
will be easy to sell the securities at a later date instead of attending
to share certificate deposit formalities.
Apart from that, when shares are registered in a CDS account, it is
safe and secure, while share certificates could get lost.
CDS services
The CDS offers the following services:
* Opening of Client Accounts
If you wish to buy or sell securities at the CSE you must open an
account in the CDS. The following categories of accounts can be opened:
* Local individuals
* Local institutions
* Foreign individuals
* Foreign institutions
You can open an account through any stockbroker. You can also
maintain CDS accounts with more than one broker. The CDS will open an
account the same day the forms are submitted.
The CDS offers the facility of changing client account information.
All such requests have to be submitted to the CDS through the relevant
stockbroker. The CDS also provides regular account statements to active
accountholders which are sent directly from the CDS to accountholders.
If you are an inactive investor, (with no trades during a calendar year)
CDS will send you your CDS statements annually.
* De-materialization of securities (deposit)
De-materialization is the process by which a shareholder of a listed
company can get physical certificates converted to electronic balances.
That is, if you have share certificates at home, and you would like to
put them in your CDS account, you can give the share certificates to
your stockbroker to deposit the shares in the CDS. This may take up to
three market days and it is advisable to deposit your physical
certificates in the CDS early. Then the shares will be ready for trading
in the Secondary market.
* Re-materialization of securities (withdrawal)
Re-materialization of securities is the process by which an account
holder can get his electronic holding converted into physical
certificates. Here, CDS will obtain a share certificate from the company
and give it to you.
* Transfer of shares
A CDS accountholder is provided the option of transferring securities
between CDS accounts opened through different stockbroker firms.
* Settlement
The settlement for equity transactions is on the third day after the
day of the transaction (T + 3). That is, if you sell shares through the
secondary market, the seller should receive his/her settlement on the
third day after the day that transaction was executed. For debt
transactions, settlement should be made at the time the transaction is
executed.
* Intra day trading
Intra day trading is where an investor buys and sells or sells and
buys the same security on the same day through the same broker. In such
transactions, the transaction fee due to the broker, CSE, CDS and SEC
will not be charged on one side of the transaction.
a. In the event the total number of shares purchased does not equal
the total number of shares sold, the transaction fees as detailed above
will not be levied on the lower quantity of shares either purchased or
sold.
b. In the event the total quantity purchased is equal to the total
quantity sold the transaction fees will not be levied from the sales
transaction.
Please note that the total purchases and sales of a client in the
same security will be considered for purpose of determining the
exemption of the brokerage, CSE, CDS and SEC fees (transaction fee).
* Handling of corporate actions (dividends, share splits, rights
issues)
‘Corporate actions’ are benefit given to shareholders of listed
companies either in the form of a monetary benefit like dividends or a
non monetary benefit like rights, stock splits.
The CDS facilitates the distribution of corporate actions by
providing entitlement schedules of shareholders who are entitled to the
corporate action as at a particular pre announced date to the relevant
Company Secretary or Registrar.
Distribution of dividends will be done by the Company Secretary or
Registrar. In the case of stock splits or rights issues, the new shares
will be directly uploaded to the respective shareholders securities
accounts in the CDS unless the accountholder has requested for a share
certificate.
* Transmission of shares
In the event of a death of a CDS accountholder, the CDS has a
procedure in place to transfer the shares to the heirs of the deceased
shareholder. A stamp duty of 0.5 percent is payable to the Department of
Inland Revenue for such transmission of shares.
The administrator of the estate/heirs have to submit the required
documents such as the probate/letter of administration to the CDS with
the CDS 19 Form after registering the documents with the relevant
Company Secretary. On receipt of these documents, the CDS will transfer
the shares to the named heirs.
*Nomination of shares
The facility for a shareholder to nominate a nominee to receive the
shares on the death of the shareholder without going through
testamentary proceedings (Court proceedings) is available.
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