SEBI pledges assistance to build strong derivatives

Hiran H.Senewiratne in Mumbai

The Securities and Exchange Board of India (SEBI) has assured all technical assistance to the Colombo Stock Exchange (CSE) to build a strong derivatives market in Sri Lanka, said SEBI Whole Time Member M.S. Sahoo.

“We will provide support to the Sri Lankan regulator, the Securities and Exchange Commission (SEC) and the CSE to develop a strong capital market through new instruments like derivatives,” Sahoo told the Daily News Business.

This was revealed when a high-powered delegation from the SEC and CSE visited the SEBI on a study tour for a collaborative effort to launch derivatives to the Sri Lankan market.

He said the securities/stocks listed in India exceed more than US$ one trillion and the number of sales traded in volume is the highest in the world. The reason being that 70 per cent of the market is dominated by several derivatives, which is a role model for many stock markets in the region.

Sahoo said India is reckoned as one the most established markets in the world for exchange traded derivative products and to further deepen the derivatives market and to cater to the growing needs of investors for sophisticated products.

He said India has a strong capital market with the introduction of new instruments to the market. This is a non-transparent trading mechanism with a National Clearing Corporation.

Sahoo also said that India has not been much impacted from the global financial crisis due to a strong industrial and service sector based with a domestic presence. Therefore, Sri Lanka should also do likewise to promote a strong capital market, he said.

India has not been impacted with the global financial crisis, as the country’s capital account was not fully convertible. India has a huge domestic market with strong agriculture, industrial and service sectors foundation, he said. He said the National Stock Exchange (NSE) which brought transparency, transformation and state-of-the-art technology to the Indian markets, brought trading in derivatives by introducing Nifty futures (NSE derivatives trading index). Therefore, Sri Lanka should also introduce indices in the event of introducing derivatives for investors.