The Securities and Exchange Commission (SEC) will improve market microstructure of the Colombo Stock Exchange (CSE). Securities and Exchange Commission (SEC) Director General, Channa de Silva told Daily News Business that this was an encouraging decision for the investors and fundamental changes like this were required.
The crossing threshold will be increased from Rs 10 million to Rs 20 million. The tick size on transactions will be reduced to 10 cents across the board.
The threshold for negotiable brokerage will be reduced from Rs 100 million to Rs 50 million. The minimum brokerage floor will be 0.15 percent.
The SEC Cess, CSE fees, Central Depository System (CDS) fees and Government levy are to remain unchanged as per the existing structure for negotiable trades.
De Silva said that the two band fee structure which exists at present will be removed.
There will be one band for transactions up to Rs 50 million. Once the change is effective the total transaction cost up to Rs 50 million will be 1.02 percent.
The Director General said the biggest beneficiaries of this reduction would be investors transacting less than Rs one million as at present whose effective reduction is
28 percent, whilst the reduction for transactions over Rs one million at present is over 16 percent.
It was further decided to revisit and review the changes towards the end of the year.
The changes to the market microstructure of the CSE including transaction costs will be active with effect from July 1 this year, he said.
The reduction of the high transaction costs was a combined effort of the Securities and Exchange Commission (SEC), the Colombo Stock Exchange (CSE) and the Central Depository System (CDS), de Silva said.
The Director General said that the reduction of the transaction costs will show a rapid increase in the trading and it will also make the CSE more attractive.
Reduction of the transaction cost was the first step and the SEC would like to move further towards a low cost structure.
This regulatory reform was very meaningful as the capital market is performing outstandingly and the country s economy is stabilizing in a faster manner.
With the reduced transaction cost the SEC expects an increase in the number of local and foreign investor participation in the CSE and these developments in the capital market will affect the country economy very favourably, he said.
SEC with the CSE and market stakeholders decided the above changes at its 257th Commission Meeting held on April 23 this year.