Delivery vs. payment: Kudos to the CSE

The decision to implement and the subsequent implementation of the delivery vs. payment system have been carried out quite well. The market has made a pivotal change in its underlying functioning with no major hiccup and all market stakeholders will benefit in the long run.

In a country where complacency is the norm, where reform and the reformist are viewed with mistrust, where praise goes to the powerful and blame to the powerless, the CSE has gone against the grain and achieved something substantial.

Under the new system the market for any given security is much increased and interested parties could now get involved in the creation of diverse financial products. Initial measures to introduce a system for share lending and borrowing have already been mooted. 

People are now able to make trades on securities not currently in their possession. Over time futures contracts and short positions will become commonplace in our market. In the long run price discovery will be much increased and liquidity should increase. Brokerage houses should and will start competing with the banking sector on rates for both lending and deposits in capital market investments.

They should be rewarded by being allowed to take over the trading of coconuts, tea, rubber, forex, gold, and spices. Sadly, institutions like the Ceylon Chamber will try to maintain control. In the spirit of capitalism, the exchange should take this newfound momentum and crush them. Invariably something somewhere will go wrong. This however shouldn’t impede progress.

The Prince of Kandy