CSE to become 100% scripless by end 2011

The Securities and Exchange Commission of Sri Lanka (SEC) has directed the Colombo Stock Exchange (CSE) and Central Depository Systems (Pvt) Ltd (CDS) to mandate the lodging of securities certificates pertaining to all listed securities at the CDS and thereby implement a system of full dematerialisation of all listed securities at the CDS.

The term full dematerialisation refers to the process of converting physical securities certificates of listed securities to a scripless (paperless) or electronic form by way of lodging the respective physical securities certificates into the respective CDS accounts of shareholders.

At present around 60% of shares are lodged in the CDS and the balance remain in certificate form.

The SEC has directed the CSE/CDS to implement the above process in the following manner.

To mandate securities of new listings to be in dematerialised form (electronic) form with effective from 1 January 2011

All applicants for IPO’s which open for subscription on or after 1.1.2011 must therefore open a CDS account and indicate their respective CDS account numbers in the IPO application form. The Company Secretary/Registrar would not issue securities certificates to the applicants who do not have valid CDS accounts.

To mandate securities of all existing listed companies which have obtained a listed status before 1 January 2011 to be in dematerialised form within a transitional period of one year from 1 January 2011.

Accordingly all holders of physical securities certificates already issued by listed companies must convert their securities certificates to a dematerialised (electronic) form by lodging such certificates into their respective CDS accounts.

This process would have to be completed within a transitional period of one year from 1 January 2011.

In order to facilitate this process the CDS would  introduce a facility for shareholders of listed securities who would not wish to trade their securities, to  “lock” their securities in a separate locked balance in their own CDS accounts .

Once securities are  “ locked”  in this manner such securities would not be visible to the CDS Participants (Stock Brokers and Custodian banks) thereby maintaining the confidentiality of the information and also safeguarding the account holder/shareholder from any possible unauthorised transaction by a Stock Broker. Trading on locked balances would be suspended.

Securities could be ‘unlocked” from a locked balance and transferred to the trading balance of the CDS account holder only with the written authority given by the CDS account holder to the CDS through the relevant Participant.( (Stock Broker and Custodian bank).

Withdrawals from the CDS would be permitted for the purpose of mortgaging of securities.

CDS account holders having securities deposited in locked balances in their CDS accounts would receive a separate statement every month.

The relevant circulars issued to CDS Participants and Listed Companies can be found at the CDS web site at following web site www.cds.lk

Shares at near 3-wk low; rupee down

(Reuters) - Sri Lanka’s stock market fell on Thursday for a third straight session in thin trade due to a lack of liquidity in the market ahead of the holiday season.

The main share index fell 13.42 points or 0.21 percent to 6,360.34, to its lowest close since 29 November. Asia’s best performer in 2010 has risen 87.9 percent, ahead of second-ranked Indonesia’s 40.9 percent.

It has fallen 11.8 percent since hitting a record high on 4 October, mainly on a liquidity shortage, and has slowed down with year-end settlements and the impending holidays.

The day’s turnover was at 922 million rupees ($8.3 million), more than the 2009 daily average of 593.6 million rupees. Foreign investors have sold a net 25.5 billion rupees in shares this year and on Thursday they sold a net 24.5 million rupees.

The bourse is trading at a forward price-to-earnings ratio of 19.1, the highest in Asia and global emerging markets, compared with all-Asia’s 13.3 and global emerging markets’ 12.3, Thomson Reuters StarMine data showed. The CSE’s 14-day relative strength index is at 39.6, towards the lower neutral limit of 30.

Volume hit 49.1 million shares on Thursday, against an average volume of 35.1 million and 52 million in the past five and 30 days respectively. The 90-day average volume is 65.9 million.

Sri Lanka’s rupee currency closed down at 111.00/03 from Wednesday’s close of 110.90/94 on importer dollar demand, currency dealers said. The rupee has risen 3 percent in 2010.