A Stock Exchange provides a liquid, open market for buying and selling of shares, debentures
etc. of publicly owned companies. Companies, which use the mechanism of the stock market to
raise debt or equity capital, commonly enter the stock market through issuing shares or
debentures to the public.
From a new issue of shares (Primary Market) The primary market is the market for new shares or debenture issues. In the primary
market, the security is purchased directly from the issuer (company). In a primary issue,
the company offering the share/debenture issue publishes a document known as the
prospectus. It is an invitation to the generalpublic to buy shares or debentures of that
company.
On the Secondary Market through a stock broker A market in which an investor could either buy or sell shares, debentures and
Government Securities from or to another investor, subsequent to the original issuance in
the primary market.
Corporate Debentures
Government Securities
Warrants
Every account will be identified through a unique account number and all correspondence and
dealings, including trading and depository activities, will refer to this account number.
Your CDS accounts should be operated through your Participant organization, and any changes
to your account will have to be forwarded through theParticipant. You cannot issue instructions
directly to the CDS.
What is the purpose of my CDS account?
Your CDS account enables you to participate in paperless trading on the Colombo Stock
Exchange. Your account will be maintained in double-entry book-keeping format and will be
updated on real time as your participant lodges your transactions at CDS.
Who is a Participant?
A participant is a central depository agent, either a stockbroker or a custodian bank, who has
been authorized by CDS to open accounts in CDS on behalf of investors.
Can I use a different broker from the one I have been using?
You may maintain multiple accounts through several Participant organisations. You can also
transfer securities across accounts held with different Participants.
You will be issued with and assisted to complete a Security Deposit Form.
Sign your form with the signature used when buying the shares.
Return the form to the participant together with the certificates you have included on the
form to be deposited.
The participant will forward the form and the certificate to CDS
CDS will forward the certificates and forms to the companys shares registrar for
verification.
When the registrar confirms the certificates as genuine, the shares will be deposited in
your account.
Once the shares are in your account you can trade in them.
You may also transfer part or all, of your portfolio between accounts opened through different
participant firms. Once the Intra-Account transfer is completed and forwarded through the
respective participant, the CDS will acknowledge by returning a duplicate of said form. Once
checked for accuracy and completeness, the transfer will take effect.
The Exchange has permitted free transfers through different accounts in the CDS in order to
accommodate foreign clients operating in different time zones to that of Sri Lanka on completion
of the relevant form. However these transfers can only be effected before the expiry of two
market days from the date of conclusion of the first transaction ( T +2); and only on condition
that there would be no change in the fund settlement source indicated at the time of the first
transaction as a result of the subsequent transfer
You get a quarterly statement if you have not had a trade for three months.
The statements are issued directly to your address as indicated on the account opening
form.
If the company is liquidated, shareholders will be settled after all the creditors,
depositors, debt holder dues has been settled.
Most preference shares have a pre-determined dividend rate which you are entitled to
receive.
A claim on the company's earnings before payment to ordinary shareholders.
Warrants (W)
This is a certificate giving you the right to buy shares at a stipulated price at a future date.
Capital Gains This is when a share's selling price exceed its initial purchase price. If the selling price
falls beyond the purchase price, you would make a capital loss. Capital Gains are free of
tax.
Dividends A company may decide to payout a portion of its earnings to shareholders. But companies
are not required to pay dividends.
Rights Issues The company may extend this privilege to existing shareholders to buy shares at a
specified and usually a discounted price, usually in proportion to the number of shares
already owned.
Distribution by the company Shares shall be offered to the holders of existing shares in a manner which would, if the
offer was accepted, maintain the relative voting and distribution rights of those
shareholders.
Liquidity Shares quoted on a stock market are generally liquid. Therefore, they can be sold easily
and you can get your money back in a few days.
Higher Returns In the longer term, shares have ensured a higher return to investors.
Hedge against inflation Shares are a good investment in an inflationary environment, since share prices increase
to protect investors from the effects of inflation.
To buy shares: Once you have read the prospectus carefully, you may fill up an application form
to purchase the shares. You can lodge these shares directly into the Central Depository System
(CDS) of the CSE or hold the certificate.
To sell shares: You will have to open a CDS account through a stockbroker and instruct them to
sell your shares in the secondary market.
Once they confirm your CDS account number, you can contact your broker through the
following ways to trade in the secondary market.
Phone
Fax
Personal visit or
The Internet
The price
The buyer must make payment for shares bought by the 3rd trading day after the
purchase (T+3)
The seller will receive payment for shares sold by the 3rd trading day after the sale (T+3)
Brokerage Fees
CSE Fees
CDS Fees
SEC Cess
Share Transaction Levy
- 0.640%
- 0.084%
- 0.024%
- 0.072%
- 0.200%
- 0.200%
- 0.0525%
- 0.0150%
- 0.0450%
- 0.200%
The CSE trading records will indicate the brokerage as zero for transactions over Rs. 50 Mn. The
Broker Firms are expected to insert 0.2000% or a higher percentage which is negotiated with the
client as the brokerage before printing the Bought/Sold Notes
Taxation
No withholding tax or stamp duties are charged on transactions. However, a 10% tax is charged
on Dividends, deducted at source.
Stockbroker websites
Business programmes on TV
Getting Started
The SIA should be credited by inward remittances received in convertible foreign currencies
from the investors and the dividends and sale proceeds realized on this investment are remittable
through this account.
Permission has been granted for the issue and transfer of shares in a company up to 100% of the
issued capital of such company, to approved country funds, approved regional funds, corporate
bodies incorporated outside Sri Lanka and individuals resident outside Sri Lanka (inclusive of
Sri Lankans resident outside Sri Lanka) subject to the exclusions, limitations and conditions
hereinafter set out.
Exclusions: the permission granted shall not apply in respect of shares of a company proposing
to carry on or carrying on any of the following businesses:
i.
ii.
Money lending
Pawn broking
iii.
iv.
Coastal fishing
Limitations:
a. The permission granted shall apply in respect of shares in a company carrying on or
proposing to carry on any of the following businesses only up to 40% of the issued
capital of such company, or if approval has been granted by the Board of Investment of
Sri Lanka for a higher percentage of foreign investment in any company, only up to such
higher percentage.
i.
ii.
iii.
iv.
v.
vi.
Mass communications;
vii.
Education;
viii.
Freight forwarding;
ix.
Travel agencies;
x.
Shipping agencies.
Coastal shipping;
iii.
iv.
v.
Lotteries.
Conditions:
a. A person resident outside Sri Lanka who is a party to a transaction permitted hereunder
must make a declaration to the effect that such person is resident outside Sri Lanka on the
share transfer form or share application form as applicable.
b. The payment for shares in any issue or transaction permitted hereunder should be made
only out of or into a Securities Investment Account (SIA) opened in a commercial bank
of Sri Lanka in accordance with directions given by the Controller of Exchange in that
behalf to commercial banks.
c. A commercial bank, a licensed stock broker or any other person entrusted with the
payment of capital monies such as sale proceeds of shares, dividends and commissions in
respect of any transaction permitted hereunder shall make such payment only into or out
of a Securities Investment Account referred to in sub paragraph (b) above.
d. The Secretary/ Registrar to a company in which the issue or transfer of shares to persons
resident outside Sri Lanka are limited under 'limitations' shall not register the name of
any person resident outside Sri Lanka or a citizen of a foreign State or their nominee as a
share holder in such company if by such registration the limits specified shall be
exceeded.
iii.
Sale proceeds realized out of sale or transfer or maturity of T- bonds/ T- bills or any
income realized by way of capital gain thereof,
iv.
Sale proceeds of shares supported by documentary evidence (Broker's Contract Notes and
evidence of payments of tax etc.) and dividends,
v.
Dividend income on units of unit trusts net of tax supported by documentary evidence,
vi.
vii.
viii.
ix.
x.
2. Permitted Debits
i.
ii.
iii.
iv.
v.
Transfer of funds to the accounts maintained by the account holder at FCBU, and
vi.
Foreign currency remitted by foreign investors as subscription for primary shares may be held in
an off-shore banking unit and upon allotment of shares be transferred, to the SIA of the same
investor. Authorized Dealers who are licensed commercial banks are permitted to approve
applications for export of share certificates issued by companies in the CSE in respect of shares
purchased by SIA account holders out of the funds in the account.
Initial Deposit, based on bank's practices, should be via Inward Remittance equivalent in foreign
currency.
Rupee Accounts for Non-Resident Sri Lankan Investment is a special account to encourage Sri
Lankan citizens residing outside Sri Lanka to remit their foreign exchange earnings for
investment in Sri Lanka.
The account is to be maintained in Sri Lanka Rupees. Joint accounts are not permitted under this
scheme.
Funds channelled through this account may be invested in shares, government securities,
debentures, units in Unit Trusts and in real assets such as land and building.
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To invest in the Colombo Stock Market, all Investors must maintain an Account in the Central
Depository System (CDS). Foreign Investors may operate their CDS Account either directly
through a Stockbroker Firm or through a Commercial Bank offering Custody Services. Please
click here to obtain a list of documents required in opening a CDS account.
Please refer CDS Participants section to obtain a list of Stockbrokers & Commercial Banks
offering Custody Services.
Trading Sessions
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Trading Sessions
Trading Sessions
The Exchange is open for continuous trading from Monday to Friday from 9.30 a.m. to 2.30 p.m.
Secondary trading of corporate and government debt securities through the DEX takes place
from 9.30a.m. to 12.30p.m.
Market Phase
Time
Pre-open
9:00 - 9:30
Open Auction
9:30
Normal Trading
9:30 - 14:30
Closing
14:30
Days
Pre- Open
During pre-open (9.00 am to 9.30 am) the system accepts orders. These orders can be
amended and cancelled during pre-open. However, no trades take place during this stage.
Orders during this period are held in the ATS and will be forwarded to the execution
engine at Open Auction time.
Open Auction
During open-auction (09.30 am), the system temporarily closes the order book and starts
matching orders. It establishes the opening price and determines the orders to be executed
according to the rules for the open-auction period (Automated Trading Rule 4).
Regular Trading
During regular trading (09.30 am to 2.30 pm) new orders are continually matched to
existing orders in the order book. If an order cannot be executed, it is stored in the order
book.
Market Close
Market closes at 2.30 pm.
Market Halt
In the event the Milanka Price Index (MPI) (or the index that may replace the MPI in the
future) drops 5% within the day from the previous market day's close, a "Market Halt" be
imposed on all equity securities for a period of 30 minutes. This is effective from 2nd
January 2009. Market wide index based circuit breakers are imposed by stock exchanges
to halt trading of equity securities in order to provide a "cooling off" period when there is
an unusual movement in the index.
Broker Firms may cancel any pending orders during the "Market Halt". However Broker
Firms cannot enter new orders or amend pending orders during the "Market Halt".
Getting Started
investors a variety of services in addition to investment advice and executing buy/ sell orders of
investors. The Stockbroker's fee is the brokerage.
There are 15 Member Firms and 6 Trading Members at the Colombo Stock Exchange (CSE).
They are governed by the regulations set out by the CSE and licensed by the Securities and
Exchange Commission (SEC). It is mandatory for you to obtain the services of a stockbroker
when transacting in the secondary market.
Sector reports
Daily & Weekly reports
The broker makes recommendations to the best of his ability and should not be liable in case the
recommendation is found to be incorrect.
3. Margin Trading
Broker Firms could provide this service, to its clients, subject to a registration to be obtained
from SEC.
4. Corporate Finance Activities
Advise and facilitate takeovers and mergers
Sponsoring listing applications for companies.
Client Registration & documentation
Withdrawal of Securities
Transfer of Securities
Settlement of transactions
Providing information
Competence
He should be qualified and experienced and have a thorough knowledge of market
behaviour. Your investment advisor should hold the Investment Advisor Certification or
be certified by the SEC.
Integrity
The stockbroker should give fair treatment to his clients, and not for his personal gain. He
must account for all transactions properly.
Knowledge about "what's happening around"
The Investment Advisor should possess knowledge on the needs of the client and market
Forecasting
This is the process of analyzing current and historical data to determine future trends.
Stock analysts use various forecasting methods to determine future stock price
movements, earnings, etc.
Brokerage Fees
CSE Fees
CDS Fees
SEC Cess
Share Transaction Levy
- 0.640%
- 0.084%
- 0.024%
- 0.072%
- 0.200%
- 0.200%
- 0.0525%
- 0.0150%
- 0.0450%
- 0.200%
The CSE trading records will indicate the brokerage as zero for transactions over Rs. 50 Mn. The
Broker Firms are expected to insert 0.2000% or a higher percentage which is negotiated with the
client as the brokerage before printing the Bought/Sold Notes
Investor Complaints
If you have a complaint, first inform the Compliance Officer of your broker firm in writing. The
Compliance Officer should be able to help you and resolve the complaint. If you are not satisfied
or if the broker delays a decision, you can forward your complaint to the CSE for investigation.
The Secretariat of the CSE will deal with the complaint thereafter.
If you are not satisfied with the decision of the Secretariat, an appeal can be made to the Dispute
Resolution Committee (DRC), to review the decision made by the Secretariat. Thereafter, the
decision made by the DRC will be verified by the Board of Directors and conveyed to you.
Transaction Costs
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Transaction Costs
Transaction Costs
Transaction cost applicable for equity & debt securities given below:
Equity - with effect from 1st January 2011
Transactions up to Rs. 50 Million - 1.12%
Divided as follows:
Brokerage Fees
CSE Fees
CDS Fees
SEC Cess
Share Transaction Levy
- 0.640%
- 0.084%
- 0.024%
- 0.072%
- 0.300%
- 0.200%
- 0.0525%
- 0.0150%
- 0.0450%
- 0.300%
(Subject to a minimum brokerage of Rs. 10/- per contract and a minimum CDS fee of Rs. 5/-)
The CSE trading records will indicate the brokerage as zero for transactions over Rs. 50 Mn. The
Broker Firms are expected to insert 0.2000% or a higher percentage which is negotiated with the
client as the brokerage before printing the Bought/Sold Notes.
(Please note that Share Transaction Levy will be charged on both sides of the Transaction)
a. In the event the total number of shares purchased does not equal the total number of
shares sold, the transaction fees as detailed above will not be levied on the lower quantity
of shares either purchased or sold.
b. In the event the total quantity purchased is equal to the total quantity sold the transaction
fees will not be levied from the sales transaction.
Please note that the total purchases and sales of a client in the same security will be considered
for purpose of determining the exemption of the Brokerage, CSE, CDS and SEC fees
(transaction fee).
Eg:
i.
Bought
Sold
Bought
Sold
Sold
1,000 shares
1,000 shares
4,000 shares
2,000 shares
1,000 shares
No transaction fee will be levied on the 4,000 shares sold, apart from the Share
Transaction Levy.
ii.
Bought
Sold
Bought
Sold
Bought
500 shares
1,000 shares
300 shares
500 shares
100 shares
No transaction fee will be levied on the 900 shares purchased, apart from the Share
Transaction Levy.
Odd lots, Crossing and AON trades will not be considered for the exemption of Brokerage, CSE,
CDS and SEC fees.
Note:
A Member Firm may share 50% of the brokerage with a foreign broker if a foreign broker is
involved in a transaction.
Corporate Debt
Brokerage - Negotiable
Fees (SEC, CSE & CDS) - 2 Basis Points (D ivided equally amongst the three institutions)
Government Debt
Brokerage - Negotiable
Fees (SEC, CSE & CDS) - Nil
Brokerage
CSE Fee
CDS Fee
SEC Cess
0.01%
0.02%
Share Transaction Levy will not be applicable for units of Closed-end Funds.
Trading Systems
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Trading Systems
Trading Systems
The CSE offers advanced infrastructure and systems for the trading of equity and debt
instruments through two trading systems. Post trade clearing and settlement of transactions is
executed through the CDS system.
The Automated Trading System (ATS) is an online, real time system which is efficient, fault
tolerant and transparent, and provides for the secondary trading of equity. The ATS version 4 has
recorded 99.8% system uptime.
Corporate announcements
The Debt Securities Trading System (DEX) is designed to facilitate the trading of corporate and
government debt securities. The system has been instrumental in facilitating the secondary
trading of the beneficial interest in government treasury bills and bonds. All corporate debentures
listed on the CSE are also traded through the DEX.
Settlement cycle will depend on the board on which the trade takes place.
Sell and Buy Back (SBB) Board - Sale/purchase on a predetermined date in future at a
predetermined price. (Only for Govt. Debt.)
SBB Crossing Board - Negotiated SBB transactions. (Only for Govt. Debt.)