New formula from September 20:
SEC removes price band
No credit beyond three days from January:
Charumini DE SILVA
The Securities and Exchange Commission (SEC) will lift the 10 percent
price band imposed on all listed securities from September 20. They will
also introduce a new formula to ensure the stability of the Colombo
Stock Exchange (CSE).
Without a reasonable cause none of the stakeholders can increase or
decrease the price of a share. The introduction of the new formula is to
safeguard the entire stakeholders of the capital market, Securities and
Exchange Commission Chairperson, Indrani Sugathadasa said at a press
conference yesterday.
Based on the last five trading days under the new formula, which
takes into account both volume and price movements, shares that captured
will get into a list and will remain there for 15 days. During this time
there will be restriction placed on those shares such as the
applicability of the 10 percent price band and the 50 percent margin
upfront for trading such shares.
This price band will not be applied on situations such as first day
trading on any security, crossing and debentures. SEC Deputy Director
General Malik Cader said “the SEC has required the listed stocks to
ensure a minimum public float on a continuing basis. There are only 60
percent of the securities that are trading through Central Depository
Systems (CDS) at present. With new companies entering into the market
the SEC wants to deposit 100 percent of the securities in the CDS. We
will be giving time for them to deposit their securities in CDS,” he
said.
The SEC has asked all stockbroking companies to refrain from
extending credit to any investor beyond three days from January 1 next
year. “If credit is to be extended beyond this specified period it could
be done only through a Margin Provider duly registered with the SEC, the
regulator said in statement to the Colombo Stock Exchange (CSE)
yesterday.
Any backlog of credit already extended by any stockbroker will be
cleared or regularize through a Margin Provider latest by the January 1,
2011 in compliance with the requirement mentioned above, the statement
said.
The SEC has issued three new brokering licenses during the year and
with that there is a total of 24 stock brokering companies in the CSE.
Brokers comment on new changes
Ceylinco Stockbrokers Director/General
Manager Sriyan Gurusinghe hailed the new formula saying that it would
help to have a value reflection in the market. “There is no need to buy
on debt and it will be an impetus to invest much efficiently and have a
free market,” he said.
Capital Trust Securities Director Sarath
Rajapaksa said the new changes to be introduced from January 1, will
harm the small retailers who used margins to sell. It will only provide
more benefits for big corporates to do their ventures.
“Currently clients over 1 million portfolio
are only able to get money from marginal providers and banks as they
have considerable money in their accounts.”
“Banks and other marginal providers are
reluctant to provide credit for clients below the one million portfolio.
These clients have to get credit from brokers,” he said.
Another Stock Broker said, “as the regulator
the SEC should penalize the exact parties without distressing the
investors. It is important that the regulator form a proper mechanism
must track capital market violators and discipline them directly,” he
said.(C de S and ih)
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