Brokers to seek variance of SEC credit rule

Friday, 19 August 2011 06:15 - - {{hitsCtrl.values.hits}}

By Dinali Goonewardene

The Colombo Stock Brokers Association (CSBA) will be making fresh representations to the Securities and Exchange Commission (SEC) to change the criteria set to extend credit to investors as 10 broking firms do not qualify to extend credit under the new rule.

“We will ask the SEC to revisit the obligations or deductions set under the criteria to have a better ability to lend,” CSBA sources told the Daily FT.

The directive permits stock brokers to extend credit to investors over T +3 days based on a computation of Liquid Assets less Obligations to arrive at zero leverage at the end of the month.

The directive mandates stock brokers to reconcile daily positions taken against the liquid assets and to submit a declaration to the Securities and Exchange Commission and Colombo Stock Exchange at the end of the month. The declaration the directive said should be submitted within two market days after the end of each month.

Increased liquidity with this move will increase the investment coming into the market, brokers said affirming that it was a boon to retail investors.

The market moved up on Tuesday when the SEC announced the new guidelines for providing credit but closed lower yesterday with the Milanka Price Index dipping .42 per cent 6410.12 while the All Share Price Index rose marginally gaining .24 per cent to 7030.85 on turnover of Rs.6.3 bn. There are 28 stock broking firms in operation at present.