SEC approves introduction of All or None Blocks on ATS

The Securities and Exchange Commission (SEC) has approved the Automated Trading System (ATS) Rules and the corresponding amendments to the Central Depository Systems Ltd. (CDS) Rules developed by the Colombo Stock Exchange (CSE) to facilitate trading of All or None Blocks.

The SEC said in the wake of the Government’s program to restructure State Owned Enterprises (SOEs), the AON method can be a medium through which strategic stakes in Government-owned entities can be transacted in a transparent manner in a competitive environment. The AON method will assist in the disposal of such assets at the optimum price.

The ATS is designed to match buy and sell orders placed by stockbroker firms of the CSE. Accordingly, several mechanisms can be used to transact securities including the Normal Order Book, Crossings and the AON facility. The AON order facility is designed to facilitate the sale or purchase of a large quantity of securities. The minimum number of securities required for an AON Block shall be at least 10% of the number of securities issued.

The AON method has many advantages over using the Normal Order Book and Crossings mechanism. Transactions using the AON method will be open for bidding for three market days whereas there is no such requirement either in the Normal Order Book or the Crossings mechanism. Further, transactions using the AON method will have a lower systemic risk since clearing and the settlement of transactions will take place on a de facto delivery as opposed to a payment basis.

Another facility provided in the AON method is the facility for a consortium of buyers to bid for the parcel collectively which will help improve liquidity.